Those economists who argue that a significant amount of crowding out exists believe that the impact of expansionary fiscal policy will be _________________ by the crowding out.Their reasoning is that if the government increases purchases,and finances that spending by borrowing money,spending in the private sector will _______________,leading ultimately to _____________ in aggregate demand.

Question

Quizplus · Accepted Answer

Economists who argue that crowding out exists believe that the increase in government purchases financed by borrowing will lead to a decrease in private sector spending. This decrease in private sector spending will weaken aggregate demand. Therefore, the impact of expansionary fiscal policy will be weakened rather than strengthened. This is supported by choice C.

Those Economists Who Argue That a Significant Amount of Crowding