Practice Quiz

CLEP Principles of Macroeconomics Exam Prep

Category - Macroeconomics

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With the introduction of government-funded health programs for the elderly and the poor, private health insurers have lost a substantial portion of their insured clients to these programs. The introduction of government-sponsored spending that curbs private investment is referred to as:
  1. Squeezing-out
  2. Crowding-in
  3. Crowding-out
  4. Squeezing-in
Explanation
Answer - C - The introduction of government-sponsored spending that curbs private investment is referred to as crowding-out.

Key Takeaway: Crowding-out occurs when government-sponsored investment in programs leads to a curb or a reduction in private investment. This is shown in health programs, for example, for the elderly and the poor. Private insurance companies essentially find themselves losing clients to the government programs.
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