If the government implements expansionary fiscal policy and there is _____ crowding out, then private investment will _____, and the aggregate demand will increase.

Question

Quizplus · Accepted Answer

When the government implements expansionary fiscal policy and there is partial crowding out, it means that government spending increases interest rates, which in turn reduces private investment. However, despite the reduction in private investment, the overall aggregate demand still increases due to the initial government spending.

If the Government Implements Expansionary Fiscal Policy and There Is