Economics Crowding Out Questions
The implications of crowding out for government debt sustainability are negative. Crowding out occurs when increased government borrowing leads to higher interest rates, which in turn reduces private sector investment. This can result in lower economic growth and tax revenues, making it more difficult for the government to service its debt. Additionally, if the government continues to borrow excessively, it may face higher borrowing costs and a higher risk of default, further jeopardizing debt sustainability.