Crowding out (economics)
economic phenomenon when increased government involvement in an economic sector affects the remainder of the market
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]
References change
- ↑ • 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