Question 2(a)(ix)
[Maximum number: 2]
The Czech Republic is a member of the European Union (a common market) but not of the Eurozone (a monetary union).
Define the term crowding out.
IB Economics HL Crowding Out Question Bank
Review IB Economics HL crowding out through government borrowing, higher interest rates, lower private investment and AD/AS effects on inflation.
How this is tested
- define crowding out as government borrowing raising rates and reducing private investment
- use an AD/AS diagram to show lower AD and reduced inflationary pressure