Given the possibilities for crowding out,bond-financed expansionary fiscal policy is MOST likely to be effective when the:
A) public sector is keen to spend or invest.
B) public sector is reluctant to spend or invest.
C) private sector is keen to spend or invest.
D) private sector is reluctant to spend or invest.

Question

Quizplus · Accepted Answer

When the private sector is reluctant to spend or invest, there is less competition for funds, making bond-financed expansionary fiscal policy more effective as it is less likely to lead to crowding out. This is because the government's increased demand for loanable funds does not compete as directly with private sector demand, allowing for more efficient use of the funds for stimulating economic activity.

Given the Possibilities for Crowding Out,bond-Financed Expansionary Fiscal Policy Is