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
Budget Cycle: The time period needed to made a state financial plan and enacts that part of it applying to the budget year. The Significant events in the cycle comprise: • The preparation of G
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