Crowding Out

Discipline: Economics

The displacement of private spending by government expenditure financed by borrowing.

When a government borrows heavily, interest rates may be forced to rise, thereby curbing individual consumption.

B M Friedman, 'Crowding out or Crowding in? Economic Consequences of Financing Government Deficits', Brookings Papers on Economic Activity, vol. ix (1978), 593-641


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