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Use the Classical model to explain why a government deficit necessarily causes crowding-out. Address how deficits are financed, and specifically, the mechanics of the loanable
Use the Classical model to explain why a government deficit necessarily causes crowding-out. Address how deficits are financed, and specifically, the mechanics of the loanable funds market. Make sure to cover key assumptions underpinning the orthodox model. In what ways does the heterodox theory of money contradict the orthodox argument concerning crowding-out? There are multiple points here. Try to get them all. Make sure your response at least draws on and explains the three pillars of heterodox money. Explain how deficits are financed, and how the government's budget relates to the private sector. Finally, make an argument: assuming the heterodox theory is correct, why do you think our economy faces persistent involuntary unemployment? If there are no financial constraints, what are the constraints, and why are they there
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