Why do classical economists believe that expansionary fiscal policy has little impact?
A) Time lags offset the impact of the policy.
B) Crowding out offsets the impact of the policy.
C) Fiscal policy has a multiplied impact.
D) Budget deficits are needed to stimulate the economy.

Question

Quizplus · Accepted Answer

Classical economists argue that expansionary fiscal policy leads to crowding out, where increased government spending reduces private sector investment, thus offsetting the policy's impact.

Why Do Classical Economists Believe That Expansionary Fiscal Policy Has