Crowding out (economics)
In economics, crowding out happens when the government starts buying or selling more stuff in the market. This affects other people and businesses--usually in a bad way.
For example, if the government buys more stuff, it may have to borrow more. By borrowing more there will be a higher interest rate (see supply and demand). This will make it harder for other companies and people to borrow. The government is said to "crowd out" the market.[1]
Crowding Out (economics) Media
The IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).
References
- ↑ • Olivier Jean Blanchard (2008). "crowding out," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Roger W. Spencer & William P. Yohe, 1970. "The 'Crowding Out' of Private Expenditures by Fiscal Policy Actions," Federal Reserve Bank of St. Louis Review, October, pp. 12-24 Archived 2011-06-02 at the Wayback Machine