Insight 8: Crowding Out or Crowding In? multiplier effect, thus stimulating or “crowding in” fi xed investment. Crowding out typically refers to any reductions in ei-ther private consumption or private investment that occur due to an increase in government spending. Government spending is perceived to use fi nancial or other resources that might otherwise be used by private fi rms. In the crowding out of investment, greater borrowing by Government creates a greater demand for funds, which drives up interest rates and reduces rates of return and hence investment by the private sector (given a fi xed level of money supply). This type of crowding out can in principle be miti-gated Some stimulus plans have been carefully designed to specify their stance with respect to private sector investment. For example, the Government of New Zealand’s national broadband plan specifi cally seeks to avoid “neither discouraging, nor substituting for, private sector investment” and “avoiding entrenching the position, or lining the pockets, of existing broad-band network providers”. It also seeks to avoid exces-sive infrastructure duplication and seeks to focus on by increasing money supply – e.g., by printing building out new infrastructure, whilst not unduly preserving the “legacy assets” of the past.61 money. The crowding out effect can also be (partly) compensated for by government spending growing the market for private-sector products through the Source: ITU. 52 Confronting the Crisis: ICT Stimulus Plans for Economic Growth