Question
The term ‘Crowd-in’ in the economy is related to which of the following?
Select the correct answer using the code given below:
- Targeted government spending acts as an engine of growth in the short run
- Government spending complements the private investment
- Government spending substitutes the private investment
- Government spending boosts demand for goods which in turn increases private demand
Select the correct answer using the code given below:
Answer: Option B
Answer: (b)
The opposite of crowding out is "crowding in" where private investment increases as debt-financed government spending increases.
If the economy is in a slowdown phase or the demand in the economy is less, then an increased government spending boosts the demand for goods which in turn increases the private sector demand for new output sources such as factories, equipment.
Thus, the private sector crowds in to satisfy increasing consumer needs.
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Answer: (b)
The opposite of crowding out is "crowding in" where private investment increases as debt-financed government spending increases.
If the economy is in a slowdown phase or the demand in the economy is less, then an increased government spending boosts the demand for goods which in turn increases the private sector demand for new output sources such as factories, equipment.
Thus, the private sector crowds in to satisfy increasing consumer needs.
Was this answer helpful ?
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