Crowding Out Effect | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

An increase in government spending may result in crowding out in the economy. This is where the public sector grows but at the expense of the private sector. For example, if the UK government invests into opening more NHS hospitals, this could divert business away for private health clinics and could result in them shutting down. As such, the jobs that are created in the public sector may be offset by job losses in the private sector, causing no change to the rate of unemployment or to aggregate demand. ~ Taken from Expert Tuition

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