Respuesta :
New classical economists believe that increase in deficit financing by government will Increase savings and fail to stimulate the economy
New classical economists typically believe that an increase in deficit financing by the government, also known as expansionary fiscal policy, will not stimulate the economy. According to the new classical economic theory, increases in government spending financed by borrowing will not increase aggregate demand and economic growth.
Instead, the increased government borrowing will lead to higher interest rates, reducing the private sector investment and ultimately offset the effects of the increased government spending. New classical economists argue that in order for expansionary fiscal policy to be effective, it must be accompanied by a corresponding reduction in taxes, which will increase disposable income and stimulate consumer spending and the economy as a whole.
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