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Economics
Tutor: None Selected Time limit: 1 Day

  1. How does government borrowing crowd out investment? What is the relationship between government borrowing and budget deficits? Give example
Aug 21st, 2015

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Government borrowing reduces the amount of capital available for investment. When government borrows internally(within the country), it reduces the amount of capital available  for other businesses to invest. By reducing the available capital, government causes loan interest rates to go up resulting in further crowding out of investment by making accessibility to capital difficult.

Budget deficits occurs when the  money that a government has raised ,mostly from taxes, is less than the money it has budgeted for in order to carry out development or run a country.Therefore, the governments borrows either internally or externally in order to cover up the budget deficit.

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Aug 21st, 2015

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Aug 21st, 2015
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Aug 21st, 2015
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