The term crowding-out effect refers to a situation in which a government _______________ results in ______________ interest rates, causing ______________ in private spending on investment and consumer durables.
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The term crowding-out effect refers to a situation in which a government increase in spending results in higher interest rates, causing a decrease in private spending on investment and consumer durables.
In this context, when the government increases its spending, it may compete with the private sector for available funds. This increased demand for funds can lead to higher interest rates, making borrowing more expensive for private businesses and individuals, and consequently reducing their spending on investment and durable goods.