The diagram shows the effect of increased government borrowing on the interest rate in the loanable funds market. What is the term used to describe the nega...
Question 1 Report
The diagram shows the effect of increased government borrowing on the interest rate in the loanable funds market. What is the term used to describe the negative effect on private investment?
Answer Details
Crowding out occurs when increased government borrowing raises interest rates in the loanable funds market, making it more expensive for private firms to borrow and invest. This reduces private sector investment, partially offsetting the expansionary effect of government spending.
Download The App On Google Playstore
Everything you need to excel in your exams
Personalized AI Learning Chat Assistant
200,000+ Exam Questions Across IGCSE, JAMB, WAEC & NECO
Over 3,900 Lesson Notes
Offline Support - Learn Anytime, Anywhere
Green Bridge Timetable
Literature Summaries & Potential Questions
Track Your Performance & Progress
In-depth Explanations for Comprehensive Learning