A higher interest rate is one economic mechanism by which government borrowing can crowd out private investment. This is further explained below.
What is the economic mechanism?
Generally, A mechanism is a mathematical representation of the organizations that govern and coordinate economic activity.
In conclusion, Increasing the interest rate is one of the ways in which the government may stifle private sector investment. This will be detailed in further detail in the following paragraphs.
Read more about the economic mechanism
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