Crowding Out

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Graphing Crowding In

1. Show initial decrease AD from government spending - on AD / AS model 2. Show decreased demand of money - on Supply and Demand of Money model 3. Show decreased interest rates - on Investment Demand model 4. Show (slight) increase in AD - on original AD / AS model

Graphing Crowding Out

1. Show initial increased AD from government spending - on AD / AS model 2. Show increased demand of money - on Money Market Model 3. Show increased interest rates - on Investment Demand model 4. Show (slight) decrease in AD - on original AD / AS model

Crowding In (with Contractionary Fiscal Policy)

real effects of government deficit spending (borrowing) - decreased government spending - decreased demand of money - decreased interest rates - increased investment - increased AD (but lower than before fiscal policy)

Crowding Out (with Expansionary Fiscal Policy)

real effects of government deficit spending (borrowing) - increased government spending - increased demand of money - increased interest rates - decreased investment - decreased AD (but higher than before fiscal policy)

Fixing Crowding In (with Contractionary Monetary Policy)

use monetary policy to counteract Fiscal policy - higher AD due to effects of crowding out - contractionary monetary policy - decrease supply of money - increased interest rates - decreased investment - decreased AD

Fixing Crowding Out (with Expansionary Monetary Policy)

use monetary policy to counteract Fiscal policy - lowered AD due to effects of crowding out - expansionary monetary policy - increase supply of money - decreased interest rates - increased investment - increased AD

Graphing Fixed Crowding In

1. Show effects of crowding out - on AD / AS model 2. Show decreased demand of money - on Money Market Model 3. Show increased interest rates - on Investment Demand model 4. Show decrease in AD - on original AD / AS model

Graphing Fixed Crowding Out

1. Show effects of crowding out - on AD / AS model 2. Show increased demand of money - on Money Market Model 3. Show decreased interest rates - on Investment Demand model 4. Show increase in AD - on original AD / AS model


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