# Crowding Out

*Macro & Economy — Finicade finance glossary*

Crowding out is government borrowing pushing up interest rates and displacing private investment. The effect is strongest when the economy is at capacity and the central bank is resisting inflation. In a deep recession with idle resources the opposite can happen — public spending pulls private investment in behind it, which is called crowding in, and is why the same policy can be right or wrong depending on the cycle.

**Also known as:** crowding out effect, crowding in

**Related terms:** [Fiscal Multiplier](https://finicade.com/glossary/fiscal-multiplier), [Government Debt](https://finicade.com/glossary/government-debt), [Budget Deficit](https://finicade.com/glossary/budget-deficit), [IS-LM Model](https://finicade.com/glossary/is-lm-model), [Interest Rate](https://finicade.com/glossary/interest-rate)

Source: https://finicade.com/glossary/crowding-out