Small Topic Studies

Question 1

What is resource crowding out ?

Answer 1

The crowding out view is that a rapid growth of government spending leads to a transfer of scarce productive resources from the private to public sector where productivity might be lower.

Question 2

What is financial crowding out?

Answer 2

Financial crowding out refers to the impact of government borrowing on the private sector. Increased government borrowing may lead to higher demand for loanable funds and therefore a rise in market interest rates e.g. on bods. This might then increase borrowing costs for private sector businesses.

Question 3

What are automatic stabilisers?

Answer 3

Automatic stabilisers are changes in tax revenues and govt spending that come about automatically as an economy moves through the economic cycle