Because of the crowding-out effect, an expansionary fiscal policy will have stronger expects than anticipated.

Question

Quizplus · Accepted Answer

The crowding-out effect suggests that an expansionary fiscal policy (e.g., increased government spending or tax cuts) may lead to higher interest rates, which can reduce private investment. This potentially weakens the policy's overall impact, making it less effective than anticipated, not stronger.

Because of the Crowding-Out Effect, an Expansionary Fiscal Policy Will