8 min read
This study guide covers the concept of crowding out in AP Macroeconomics. It explains how increased government borrowing can lead to higher interest rates, reducing private investment and lessening the impact of expansionary fiscal policy. The guide uses graphs and examples to illustrate the process, discusses long-run impacts on economic growth and infrastructure, and provides practice questions with an answer key.
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Question 1 of 6
Ready to ace this? 😎 Crowding out happens when increased government spending leads to what primary effect?
Lower interest rates and increased private investment
Higher interest rates and reduced private investment
Decreased demand for loanable funds
Increased supply of loanable funds