Economics Crowding Out Questions
The effects of crowding out on private sector borrowing costs are generally negative. Crowding out occurs when increased government borrowing leads to a decrease in the availability of funds for private sector borrowing. This increased competition for funds can drive up interest rates, making it more expensive for businesses and individuals to borrow money. As a result, private sector borrowing costs tend to increase, which can hinder investment, economic growth, and overall productivity in the economy.