Question
For each of the following scenarios, indicate if it would necessarily lead to crowding out or not, and explain your reasoning. Assume a closed economy.
For each of the following scenarios, indicate if it would necessarily lead to crowding out or not, and explain your reasoning. Assume a closed economy.
(e) Illustrate this economy's situation on a short-run and a long-run Phillips curve. Label the short-run equilibrium point R.
(g) Assume the federal budget is balanced when the policy from part (f) is implemented. On a fully labeled loanable funds graph, illustrate the impact of this policy on real interest rates.
(i) Assume that the Federal Reserve takes a policy action to keep interest rates low. Illustrate the impact of this action on a fully labeled money market graph.
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