Question

The government implements a cash for clunkers program whereby anyone who owns a car that is at least six years old can trade it in on a new car and the government will pay for half of the cost of the new car. Suppose the majority of the people who take advantage of this program would have bought new cars anyway. This is an example of:___________-.

Answer 1

Answer:

The correct answer is:

Crowding out

Explanation:

Crowding out is an economic strategy normally used by the public sector in order to produce a displacement or expulsion of the private sector. This occurs because the capacity of investment for the enterprises is affected due to the public debt caused by the strategy itself.