What is crowding out?
This term may be known in Portuguese as the displacement effect or the eviction effect.
When the whole policy is unbalanced, the effect is known as “
How the effect occurs displacement or Crowding out
The October crowding comes as the government plans to increase public spending in an attempt to create an important expansion policy for the country’s economy.
To increase spending, the government must finance itself with more taxes, or by issuing more government bonds, raising interest rates to attract new investors.
The increase in government interest rates influences other interest rates in the country, making private investments more expensive, canceling, in part or in whole, the economic expansion .
When moving , the amount of public spending increases without increasing the Gross Domestic Product (GDP) in the period, that is, the government increases its indebtedness in proportion to GDP.