Explanation

• The term "crowding out" refers to the decrease in private investment that occurs when government borrowing increases.
• When the government borrows more money from the financial markets to finance its spending, it increases the demand for loanable funds, leading to higher interest rates.
• Higher interest rates make borrowing more expensive for businesses and individuals, reducing their willingness to invest and borrow for private investment projects.
• This phenomenon is known as "crowding out" because government borrowing "crowds out" private investment by competing for available funds in the financial markets.