When the government increases its borrowing due to expansionary fiscal policy, the demand for loans rises, leading to an increase in __________, which can crowd out private investment.

When the government borrows more money to spend on things like roads or schools, it needs to take out loans from banks or other lenders. This increase in borrowing raises the overall demand for loans in the economy. As more people and businesses want loans, the interest rates on these loans tend to go up. Higher interest rates can make it more expensive for private businesses to borrow money for their own projects, which is known as crowding out. For example, if a company wants to build a new factory but faces higher interest rates due to government borrowing, it might decide to postpone or cancel its plans, leading to less private investment in the economy.