Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the:

Question

Quizplus · Accepted Answer

Joseph is concerned about the crowding-out effect, which occurs when increased government borrowing leads to higher interest rates, reducing the availability of funds for private investment.

Suppose a Government Finances Its Expansionary Fiscal Policy by Borrowing