Principles of Macroeconomics / Unit 15 MAC 1407 short lesson, about 20 seconds
Crowding In
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The idea
The mechanism reverses. A smaller deficit reduces government borrowing, so the interest rate falls and private investment rises. That is crowding in, the mirror image rather than a separate theory.
In practice
Public spending can also crowd investment in directly, by building what firms then use.
Where people slip
One study found infrastructure crowded investment out while health and education crowded it in.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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