Following the severe economic disruption of 2026, the government of Solaria launched an ambitious 'Green Transition Initiative' to retrofit municipal infrastructure and expand renewable energy grids. This program was funded entirely by issuing sovereign Green Bonds. Critics argued this heavy borrowing would trigger severe crowding out of private enterprise.
However, several factors suggested this risk was minimal. First, due to a sharp rise in precautionary household saving, there was a massive pool of dormant domestic capital in commercial bank accounts that could easily absorb the new bond issues without raising borrowing costs. Second, because of widespread underemployment and factories running at 65% capacity, the state's resource grab would simply employ idle workers rather than bidding them away from existing private firms. Finally, the central bank committed to a targeted yield-curve control policy, pledging to purchase government debt to prevent any rise in long-term interest rates.
Using information from the stimulus material, identify two reasons why crowding out may not occur.
