Economics Crowding Out Questions
The effects of crowding out on interest-sensitive sectors like housing and construction are generally negative. Crowding out occurs when increased government borrowing leads to higher interest rates, which in turn reduces private sector investment. This reduction in private investment can have a significant impact on interest-sensitive sectors like housing and construction, as higher interest rates make it more expensive for individuals and businesses to borrow money for purchasing homes or investing in construction projects. This can lead to a decrease in demand for housing and construction, resulting in slower growth or even contraction in these sectors.