If the Crowding-Out Effect Is Strong, How Will the Potency

question 96

Multiple Choice

If the crowding-out effect is strong, how will the potency of discretionary fiscal policy be affected?

• A) It will make fiscal policy more potent.
• B) It will make fiscal policy less potent.
• C) The potency of fiscal policy will be unaffected.
• D) The potency of expansionary fiscal policy will be reduced, but that of restrictive fiscal policy will be enhanced.

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