How Government Deficits Have a Crowding Out Effect

Описание: Expansionary Fiscal Policy results in government deficits, and since deficits must be financed (i.e., funded) governments must borrow money from the financial markets. This increase in the demand for loanable funds results in higher interest rates. Increasing interest rates increases the opportunity cost of spending money and therefore reduces business investment and consumer spending. Deficits are an unwanted result of expansionary fiscal policy (i.e., deficit spending).

This video is made for 1st year college students or AP/IB Economics students. It focuses on foundational economic concepts.