If crowding out exists, the expansionary effect of government spending will be

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Social Studies

27 May, 20:21

If crowding out exists, the expansionary effect of government spending will be

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Wesley Burgess · Answer 1

If crowding out exists, the expansionary effect of government spending will be a declining budget deficit. A budget deficit happens when the government spends more money in expenses than it makes in revenue. The crowding out effect happens when there are increase interest rates which leads to private investment spending declining.