Episode 2: Crowding Out Effect Finance School by PFS

This podcast discusses on the topic "Crowding Out Effect". When government budget deficits rise too much, government borrowing may divert private sector investment from taking place. This effect is known as the “Crowding Out” effect. So, the crowding out refers to how fiscal deficits impact the economy, financial system, interest rates, and inflation. When the government spends money, it must compete with the private sector to get its hands on whatever it is trying to buy.  The term crowding out refers specifically to how the government extracts resources from the private sector to pay its bills and what the consequences are.

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