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My textbook says "If a given change in the demand for money has a large effect on the interest rate and if a given change in the interest rate has a large effect on aggregate expenditure, then the crowding-out effect is large and fiscal policy has a weak effect on aggregate demand. How do large changes equate to a weak fiscal policy?
This question asked by Brooke H. from High School AP Economics
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Whenever interest rate rises appreciably there crowding out effect is large because higher interest rates reduce the amount of borrowing in the economy. When crowding out occurs this weakens the effectiveness of fiscal policy since reduced private sector borrowing lowers aggregate expenditures.
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