Principles of Macroeconomics / Unit 15 MAC 1404 short lesson, about 20 seconds
Crowding Out, Stated Precisely
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The idea
Crowding out is what happens when government borrowing absorbs financial capital and leaves less available for private investment in physical capital. It is a claim about a quantity, not about waste.
In practice
The mechanism runs through the interest rate, which the next entries trace.
Where people slip
Crowding out says private investment fell. It says nothing about whether the public spending was worthwhile.
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