An easy fiscal policy generates
A)multiplier effect only.
B)crowding effect only.
C)both multiplier effect and crowding out effect.
D)neither multiplier effect nor crowding out effect.

Question

Quizplus · Accepted Answer

An easy fiscal policy, which involves increased government spending or tax cuts, can lead to a multiplier effect by boosting aggregate demand. However, it can also cause a crowding out effect if increased government borrowing leads to higher interest rates, which may reduce private investment.

An Easy Fiscal Policy Generates