After a real negative shock,government spending only improves growth minimally and aggregate demand doesn't fully recover because of:
A) crowding out.
B) Ricardian equivalence.
C) effectiveness lags.
D) wealth effects.

Question

Quizplus · Accepted Answer

Government spending can lead to crowding out, where increased public sector spending reduces private sector investment, thus limiting the overall impact on aggregate demand and economic growth.

After a Real Negative Shock,government Spending Only Improves Growth Minimally