Crowding Out
0.0(0)
Studied by 5 people
Learn
Practice Test
Spaced Repetition
Match
FlashcardsCard Sorting
1/3
Study Analytics
Name | Mastery | Learn | Test | Matching | Spaced |
|---|
No study sessions yet.
4 Terms
1
New cards
What is the crowding out hypothesis
\
* when free-market economists argued against the rising share of GDP being taken by the public sector.
* when free-market economists argued against the rising share of GDP being taken by the public sector.
2
New cards
Crowding Out
* refers to negative impact that government spending can have on private investment
* Suggests when government increases its spending
* Increases the demand for goods and services - leads to higher interest rates and inflation
* Makes borrowing more expensive for private investors
* Private investment may decrease
* Suggests when government increases its spending
* Increases the demand for goods and services - leads to higher interest rates and inflation
* Makes borrowing more expensive for private investors
* Private investment may decrease
3
New cards
Keynesian theory multiplier effect on crowding out
Government spending can increase economic activity and boost private investment
4
New cards
response to crowding out point
Ovesrated - government spending has positive impact on private investment → increases AD and more stable environment economically.