Question

Discuss the problem of crowding out and the solution of this problm by graphs and equations

Answer #1

Explain the ‘crowding-out’ hypothesis. Explain the ‘crowding-in’
hypothesis. Discuss the problems with deflation.

On this problem, be sure to discuss the dynamic behavior and
characteristics of the graphs.
3 (a) Solve AND find the characteristics curve for the eqtn
: ut + (x-t)ux = 0.
(b) Find the solution to the initial value problem u(0, x) =
e^{-x^2},
(c) and discuss its dynamic behavior.

What is crowding out? How do rising interest rates cause
crowding out? Why is crowding out of concern for the economy?

Discuss ways in which indirect crowding out and direct
expenditure offsets can reduce the effectiveness of fiscal policy
actions.

Using the concepts of the substitution effect, leakages, and
crowding out, discuss whether a small city like Indianapolis or a
big city like Los Angeles would benefit more from hosting the NCAA
Men’s Final Four Basketball Tournament.

4. Clearly explain what “crowding out” refers to, what would
cause it to occur, and why this is viewed as a problem. Explain how
the interest elasticity of investment affects the level of crowding
out in the Keynesian model. Be sure to explain WHY this is the
case. (10 pts.)

Explain the effect of Fiscal Policy Under Fixed Exchange Rates .
Explain the crowding out and its effect. USE GRAPHS and within the
IS-LM Framework. Explain changes in the main economic variables:
interested rate (i), Demand (D), Output (Y), and exchange rate
(E).

Under what circumstances can there be no multiplier and complete
crowding out.

3) In what type of economy would you expect crowding out to be
least problematic (and why) AND in what type of economy would you
expect crowding out to be worse (and why)?

Suppose that the MPC = 0.60; there is no investment accelerator
and no crowding-out. If government expenditures increase by $25
billion, how does aggregate demand change in direction and size as
well?
If NX falls $40 billion, the MPC is 8/11, and there is a
multiplier effect with no crowding out and no investment
accelerator, how much does aggregate change direction and size as
well? is 8/11 x 40 billion right?

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