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​This revision video looks at the arguments for and against the crowding-out view of higher government spending and borrowing.

Supporters of the crowding-out view argue that​ higher state spending and borrowing can be inefficient and might lead to increased real interest rates and taxes for the private sector which eventually undermines the impact of a fiscal stimulus.
Keynesian economists counter that well-targeted and timely stimulus spending helps to support growth, output, jobs and competitiveness. Indeed higher government spending can be partially self-financing and an important policy option when private demand is depressed, for example following an external shock.
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