Exploring Macroeconomics
Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 16, Problem 15P
To determine

(a)

To explain:

The crowding out effect caused by an increase in government purchases.

To determine

(b)

To explain:

The reason for the value of the crowding-out effect depends on the responsiveness of the interest rate towards the increased government borrowings and to the change in interest rates.

To determine

(c)

To explain:

Theway the size of the crowding-out effect can affect the size of the change in aggregate demand.

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