The crowding-out effect of an expansionary fiscal policy is the result of government borrowing in the market which

Question

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When the government borrows from the market to finance its expansionary fiscal policy, it increases the demand for loanable funds, which in turn drives up interest rates. This increase in interest rates makes borrowing more expensive for private investors and businesses, thereby reducing their net investment spending. This crowding-out effect can offset the intended stimulus of the government's fiscal policy.

The Crowding-Out Effect of an Expansionary Fiscal Policy Is the Result