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Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding out, then GDP would have

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If there had been full crowding out, then GDP would have increased by less than $100 billion.

What is the meaning of crowding out?

Most often, borrowing is used by nations to cover their budget deficits. When governments borrow, they are in competition with everyone else in the economy for the limited quantity of savings that are available. This rivalry causes the real interest rate to rise and private investment to fall. The term "crowding out" refers to this process.

Affect on economic growth

Because of the "crowding out effect," which prevents private investment from growing as much as it would have otherwise, economic growth is slowed down. With a smaller capital stock, the economy will experience slower development in terms of output and labor's marginal productivity.

Learn more about crowding out here:

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