What Is "Crowding-In" Effect? Explain the Factors Which Determine the Strength

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The Answer is Crowding-in occurs when government spending, by raising real GDP, induces increases in private investment spending.As the economy expands, businesses find it more profitable to add to their capacity in order to meet the greater consumer demands.Because of this induced investment, any increase in G may increase investment, rather than decrease it as the crowding-out hypothesis predicts.
The strength of the crowding-in effect depends on how much additional real GDP is stimulated by government spending and on how sensitive investment spending is to the improved business opportunities that accompany rapid growth.

What Is "Crowding-In" Effect? Explain the Factors Which Determine the Strength

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What Is "Crowding-In" Effect? Explain the Factors Which Determine the Strength

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