Crowding out influence
What is the crowding out influence and why might it be relevant to fiscal policy?
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The crowding-out effect is the decrease in investment spending caused through the increase in interest rates arising from an rise in government spending, financed by borrowing. The raise in G was designed to rise AD but the resulting rise in interest rates may decrease I. Therefore the impact of the expansionary fiscal policy may be decreased
How do opportunity costs influence the capital budgeting decision-making procedure? Opportunity costs reflect the foregone benefits of alternative not selected when a capital budgeting project is chosen. Any decrease in the cash flows of the fi
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