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Crowding out

Crowding out Definition

Crowding out is also a term in economics. It happens when the government is borrowing heavily while businesses and individuals also would like to borrow. The government can always pay the market interest rate, but the private sector cannot, and is therefore crowded out. The state is in other words borrowing so much that the interest rates increases which in effect squeezes the privat sector out of the credit markets. Crowding out can also come from state spending on areas that might be provided more efficiently by the private sector, such as health care, or even through charity and redistribution.

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Economy




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