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Economics
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How does government borrowing crowd out investment? What is the relationship between government borrowing and budget deficits? Give example

Aug 22nd, 2015

Thank you for the opportunity to help you with your question! Hi, He observes that work expands so as to fill the time available for its completion.

Borrowing by government in itself can be good and at the same time it can be bad, borrowing in government crowed out investment in that by government borrowing to provide some goods and services, it blocks some private individuals who would otherwise invested in provision of such goods and services. Crowding out reduces private investments. through government borrowing, there will be an increased interest rate levied on the private investors, this deters them from investing because of high interest. Government borrows when there is budget deficit in financing its projects. when the government realizes there is a deficit in its budget, in order to finance its projects, she opts to borrow either internally or externally.

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Aug 22nd, 2015

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Aug 22nd, 2015
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Aug 22nd, 2015
May 27th, 2017
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