Crowding-out effect: The reduction in private investment that occurs when government borrowing raises interest rates.
How to apply it: Explain how deficit-financed fiscal policy can partially offset the multiplier effect by crowding out private spending.
Course: AP Macroeconomics · Unit: National Income and Price Determination
Practice questions about Crowding-out effect on AimFive — get rubric-based feedback showing exactly which points you earned.
AP and Advanced Placement are trademarks of College Board. AimFive is not affiliated with or endorsed by College Board.