As a result, interest rates rise and the amount of private investment spending declines. This illustrates the crowding-out effect.
According to the crowding out effect, rising public spending reduces or even completely eliminates private spending. According to the crowding-out effect, rising interest rates have a negative impact on initial private total investment spending. Keep in mind that investors' investment decisions are impacted by an increase in interest rates. Economic income may decline when the crowding of impact reaches noticeably high levels.
This occurs because rising public sector spending typically results in falling private sector spending. One of the most frequent instances of crowding out occurs when a big government, like the one in the United States, raises its borrowing levels and starts a series of events that causes the private sector to cut back on expenditure.
To learn more about crowding out refer here:
https://brainly.com/question/7455899
#SPJ4
