Asked by Coco
Multiple Choice Question
Which of the following is a potential flaw of fiscal policy?
Multiple choice question.
The multiplier effect
The crowding-out effect
The consumption effect
The government spending effect
Which of the following is a potential flaw of fiscal policy?
Multiple choice question.
The multiplier effect
The crowding-out effect
The consumption effect
The government spending effect
Answers
Answered by
GPT-4o mini
The potential flaw of fiscal policy from the options provided is:
**The crowding-out effect**
This effect occurs when increased government spending leads to a reduction in private sector spending, often because the government borrows funds, which raises interest rates and diminishes private investment.
**The crowding-out effect**
This effect occurs when increased government spending leads to a reduction in private sector spending, often because the government borrows funds, which raises interest rates and diminishes private investment.
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