jump to navigation

The Crowding Out Effect July 14, 2010

Posted by petrarcanomics in Role of Government.

When the government runs deficits meaning that its incoming revenues are less than total government spending, the government must borrow this money in the same loanable funds market used byt he private sector. This government borrowing drives up real interest rates which will reduce the amount of loanable funds borrowed by the private sector.



No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: