Crowding Out
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
