Question
Annswer these questions in a short paragraph: 1.) There is $10 trillion in the loanable funds market. $6 trillion in private borrowing and $4 trillion
Annswer these questions in a short paragraph:
1.) There is $10 trillion in the loanable funds market. $6 trillion in private borrowing and $4 trillion in government borrowing. The federal government increases its borrowing to $5 trillion, crowding out $1 trillion in private borrowing. Interest rates remain the same. Make an argument that the GDP remains the same and that we don't care about the crowding out.
2.)There is $10 trillion in the loanable funds market. $6 trillion in private borrowing and $4 trillion in government borrowing. The federal government increases its borrowing to $5 trillion, crowding out $1 trillion in private borrowing. Interest rates remain the same. Give an argument why we should care about the crowding out.
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