Crowding Out Application Exercise $2$

Complete the following set of sentences concerning the effect of expansionary fiscal policy on the aggregate economy.

a$.$ In the market for loanable funds, the demanders of loanable funds are the $($Click to select$)$

The suppliers of loanable funds are the $($Click to select$).$

b$.$ If the government funds expansionary fiscal policy through borrowing, the $($Click to select$).$

c$.$ The equilibrium interest rate will $$ and the equilibrium quantity of loanable funds will $($Click to select$)$ due to the borrowed government funds.

d$.$ The change in the market for loanable funds will lead to $($Click to select$)$ in the quantity of investment demanded.

e$.$ The goal of expansionary fiscal policy is to $]$ aggregate demand.

The change in investment demand described in part $($d$)$ will lead to $$ in aggregate demand. As a result, fiscal policy is $[$ effective than theory predicts.