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Crowding out occurs when investment declines because a budget:.

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Tundexi

Because a budget deficit makes interest rates fall, the investment decline and makes a crowding out.

What is a Crowding out?

Crowding out refers to when personal consumption and investments of business reduced because of increases in government spending

For Instance, when the government raises its spending and fund part of sector of finance, this will increase the demand for money in the economy.

In conclusion, the crowding out occurs when an investment declines because a budget deficit makes interest rates fall.

Read more about crowding out

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