Crowding out

Crowding out is a reduction in private spending, investment, or activity caused by government action competing for resources or changing incentives.

Loanable funds market: A model of saving and borrowing in which interest rates balance the supply of funds with demand for loans. Government borrowing can raise demand for funds and put upward pressure on interest rates.
Fiscal multiplier: The change in total economic output resulting from a change in government spending or taxation. A large multiplier signals that public spending may stimulate activity rather than merely displace it.
Expansionary fiscal policy: Fiscal measures, such as higher spending or lower taxes, intended to increase aggregate demand. Its effects depend partly on whether added public demand displaces private spending.
Empirical identification: The process of isolating a causal effect from observed data despite confounding influences. Researchers must separate fiscal effects from the economic conditions that prompted government action.
Interest rate: The price paid for borrowing money, usually expressed as a percentage of the amount borrowed. Higher rates can make private borrowing and investment less attractive.
Liquidity trap: A situation in which interest rates are near their lower bound and monetary policy has limited room to stimulate demand. With rates constrained, additional government borrowing may produce little rate-driven crowding out.
Public investment: Government expenditure on long-lived assets such as infrastructure, schools, and research facilities. Public capital may either compete with private projects or make them more productive.
Fiscal stimulus: Temporary government spending increases or tax reductions intended to support economic activity. Its net effect depends on both demand created and private activity displaced.
Government budget deficit: A shortfall that occurs when government spending exceeds government revenue over a given period. A deficit may require borrowing that competes with private borrowers for funds.
Ricardian equivalence: The proposition that households may save tax cuts in anticipation of future taxes, leaving consumption unchanged. It predicts muted demand effects through a different channel than resource competition.

Linked from 10 pages