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Sagot :
A government borrowing money to finance fiscal policy can crowd out investments.
Expansionary fiscal policy requires either a cutting taxes or an increase in government spending. Increasing government spending requires the government to borrow additional funds. This increase in demand for loans results in a rising interest rate, which then limits the ability of private investors to borrow funds.
Expansionary fiscal policy requires either a cutting taxes or an increase in government spending. Increasing government spending requires the government to borrow additional funds. This increase in demand for loans results in a rising interest rate, which then limits the ability of private investors to borrow funds.
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