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Economics

Fiscal Policy Multipliers and Crowding-Out Effects

Quick fact

The size of the fiscal multiplier is not constant; it can be as high as 2 or more during a deep recession, but close to zero or even negative when the economy is at full employment.

Why this is interesting

If a government spends $1 billion on new infrastructure, could the economy grow by more than $1 billion—or less? The answer depends on a hidden force that can choke off the intended boost.