Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

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Answer 1

Question

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

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Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Use the following demand data: Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40%

Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40% ur marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000.

Answer 2

Question

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

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Answer 3

Question

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

Answer 6

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.

Answer 7

Chapter 11, Problem 1VQP

To determine

Explain the difference between zero crowding out, incomplete crowding out, and complete crowding out effect.

Answer 8

Expert Solution & Answer

Explanation of Solution

Zero crowding out: In zero crowding out effect, the government increases spending, but the private sector spending remains constant.

Incomplete crowding out: In incomplete crowding out, the government increases spending, then there is less than the proportionate decrease in price sector spending.

Complete crowding out: In complete crowding out effect, if the government increases spending, then there is an equal decrease in private sector spending.

Figure -1 shows the recessionary gap as follows:

Macroeconomics (Book Only), Chapter 11, Problem 1VQP

In Figure -1, the recessionary gap occurs at point 1. Here, a fall in private expenditure offsets the initial increase in aggregate demand because of increase in government spending. Thus, the aggregate demand remains constant and there is no change in real GDP and unemployment rate. Therefore, the complete crowding out and expansionary fiscal policy does not have any effect on the economy.