Crowding out (economics)
Okay kiddo, so you know how sometimes you might want a toy or a treat, but your allowance or savings isn't enough to buy it? That's kind of like what happens in the economy with something called "crowding out."
See, when the government wants to spend more money on things like schools or roads or healthcare, they usually have to borrow money from people like banks or investors. But when the government borrows a lot of money, it can make it harder for other people, like businesses or regular people, to borrow money too.
That's because there's only so much money to go around. If the government is borrowing a lot, there might not be as much left over for other people who want to borrow money to start a business or buy a house. This is called "crowding out."
It's like if everyone in your class wanted the same toy, but there was only one toy available. If one person gets the toy, there's less chance for the other people to get it too, because there's only one toy to go around.
So, crowding out happens when one group, like the government, takes up a lot of the "money" toy, leaving less for others who also want to use it. Does that make sense, kiddo?
See, when the government wants to spend more money on things like schools or roads or healthcare, they usually have to borrow money from people like banks or investors. But when the government borrows a lot of money, it can make it harder for other people, like businesses or regular people, to borrow money too.
That's because there's only so much money to go around. If the government is borrowing a lot, there might not be as much left over for other people who want to borrow money to start a business or buy a house. This is called "crowding out."
It's like if everyone in your class wanted the same toy, but there was only one toy available. If one person gets the toy, there's less chance for the other people to get it too, because there's only one toy to go around.
So, crowding out happens when one group, like the government, takes up a lot of the "money" toy, leaving less for others who also want to use it. Does that make sense, kiddo?