What is meant by crowding out? Explain the difference between crowding out in the short run and in the long run
What will be an ideal response?
Crowding out refers to a decline in private expenditures — consumption, investment, and net exports — as a result of an increase in government purchases. In the short run, an increase in government purchases results in partial crowding out of private expenditures, but in the long run, a permanent increase in government purchases results in the complete crowding out of private expenditures.
Economics