9. Monetarists do not believe that pure fiscal policy has much effect on income, employment, and prices. Since a government deficit would have to be financed by borrowing from the private sector, it would cause interest rates to rise and private investment and consumption to fall. A crowding-out of private spending would result.

The experience with the large deficits of the last 1 5 years suggests that government borrowing does influence the interest rate but that this effect is usually felt 12 to 24 months after the major expansion in government borrowing.