Scribd Logo
Upload

Welcome to Scribd!

  • Ubmitted To: Ms. Meqha Chand Hiok

    Uploaded by

    fddr
    16 views6 pages
    1. Increased government spending may crowd out private investment as it leads to higher interest rates, which decreases aggregate demand and output. 2. This phenomenon can be explained using the IS-LM model, which shows how higher government spending shifts the IS curve to the right, increasing interest rates and crowding out private investment which lowers aggregate demand. 3. However, this crowding out effect depends on how sensitive investment demand and money demand are to changes in interest rates. If money demand is more sensitive, there will be less crowding out of private investment.

    Original Description:

    Original Title

    Economic

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    1. Increased government spending may crowd out private investment as it leads to higher interest rates, which decreases aggregate demand and output. 2. This phenomenon can be explained using the IS-LM model, which shows how higher government spending shifts the IS curve to the right, increasing interest rates and crowding out private investment which lowers aggregate demand. 3. However, this crowding out effect depends on how sensitive investment demand and money demand are to changes in interest rates. If money demand is more sensitive, there will be less crowding out of private investment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    16 views6 pages

    Ubmitted To: Ms. Meqha Chand Hiok

    Uploaded by

    fddr
    1. Increased government spending may crowd out private investment as it leads to higher interest rates, which decreases aggregate demand and output. 2. This phenomenon can be explained using the IS-LM model, which shows how higher government spending shifts the IS curve to the right, increasing interest rates and crowding out private investment which lowers aggregate demand. 3. However, this crowding out effect depends on how sensitive investment demand and money demand are to changes in interest rates. If money demand is more sensitive, there will be less crowding out of private investment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 6

    Date ...

    sds
    OOPage No. oenuseex ***

    ubmitted to
    Ms. Meqha Chand hiok

    ubmittec bu.
    Shavincler Sinqh urma
    B.AChons Social Sciencas
    Semester - I
    Dal0 d
    JO Pago No.isrosese

    What uiLO bo impact imcaocbimg govnmam imVIst-


    mOmJ uuhem Qcomomy % growimy ahidly

    hahhemamamomduhabyimCndased gouernman han-


    dture may lacl Jo a 8quaazimg ivate invDslimonl.
    0zhendite , i8 3lored b as th Codmg--
    Cnou0zmmonxpenditee theucls cu haiats 3ctan
    LnVestmal exhemdihwre Thus, tha mult plior hd
    govenmhteni Axphand.tute 1 lessenod bacaup h
    negaliva eet on Jarivatr invastm2rt shawimg
    hghen imterest rassTt i8 baause fhe uid
    Oul alect agregatatput declimes ktimtosest
    Snata imcroase
    lale can oxplain dne hhenomemon Iswding-od
    ac im eams agmgato aemanl CeiTG]
    amd ag9negate adh hpinoch and he Ts-LM
    appeech.Wehaua larni that euilanitum ahenal
    income is dettmimsd al Ahat hoimt uuhare cAItG
    Line cuts the us° Uime This is demonstaated
    by Ct1+G ime auhon the Srate tenest
    aILmod to n
    Cuta the 4s° Aine_a het E ane the
    ogui0 bsnium mahionak imcamo hu8 oetermm imad
    Lot dnaraba am mcza2 im govarnmaa7 rpen-
    e t e nsm de Ca Th:3 ausL CtLtG
    Dino to h + u h toCh T+ G Thi causs
    GgegaDmccnt to93e de OYah13
    1ahen10m Ccomo howov aubes manydOmamcl
    amd imterlst Satn Jo 2i3 een , Je N2 3
    Date
    BO Page No.

    leadimgde a kall in Jaivata hlamned invastm-


    ont orhemdlitcre nom ta Tq

    Y2 mcoma

    Tnis Cause3 aggcagata demado nedo sh


    down Jo Ch 1a4a Cassumima hzn 4h1)-
    Eoui6a. um mou accuss atnoat aVate
    Jhat 2uilbaiumimcemanas alaalined to
    oYz 2CYz This isCucdimg-od hkencm-
    Dmonani Vete Sectaimvestmand 1s 6aing
    Squalznc Here- seo hcdhalmulTpliE.
    alact im olaion.
    However3th09 wOuld mat have blon ny
    29audingoud hhomemanon imtares1 l h
    RDate
    BaPage No
    dwe do abclne. Suhhase aentral bank
    -maney84/ly do manca govasnumonlimcsoake
    ,

    xpan
    dtusd Tt impact cam nowba lalt im Jhe
    manay umanket imJho nm louwr
    GnateThs
    Gnate imterasd
    mwang has higha manly demand
    y thehublie cam be m y arcasB
    maey. ThiS maycausiintonas rat quanhty
    al Jo
    Causimg aggugale athu so Aise Ln
    othen swncsimstea.d Cruding
    Umay lcheaiemte newding-im a tos 2
    ctyon2
    Cadimg-out hhonomunon tan ba balten
    2cplainud
    im tenims gLS-LM omau@R as it combimiS
    botn geacdo. maakof and monaymaaket
    Aggmgata demand-aagat outhot ehhrach
    dhes mat dizhlay dhe mks betuwandha
    Lmazket amd fho geod
    momeymankat
    Tm Fi 2, havg dnawM amd LM CUvs Fas
    imhicity ugave mot tansiclozed Jiguidlity
    ach laet s thoLM CoVJntia ous
    oconay aJlgulóaium_a haint E The
    Ct23rn0Lhonedimg mcome-mtozestate tom6i/n-

    Am imCALALe 1mgovammirb 2nondimg 8h/ts Jhu IS


    unu 1S,3hng the apur.Lafupndint to e2
    Lonsaguwtlyimcome Caises t by om ay But.
    JhoDlomomy i ods0ouid6aimgood maskeh
    13 ih 0uilibaiumbut emoney makd is au
    apuil8nmutnThi% 13.bocaiise hghen mom auses
    meneydomand to a g0
    ADate .
    dO Page No.

    LM Oe

    YY comg

    hi3 ecosg damand an marey thom hulls


    dho intprost sato lhadiy da a allin agpga
    danand a t bquaezes Gd soma v a t
    mu0stmant Jendhng to seduca he Si
    Jhe nultiplien act on hu mLand nal
    lguiba um nau ccquasat hoind Ea ama
    aggrugat odhud dealnos Jo oya a t thst
    ihos dha mc0s magQzAquta 1mtema CoYso
    ilo39dhamdh amain mdcalnd 6y dhe
    cnulthlien YaY, havimg ho Qull Mact
    eel
    hiseedback hhonanomon 18 gtaa g
    Jo a8 a oucimy.od b c t Tt uduc
    Jho 8g4 ga vemimemtAapamdtunl
    mulh pls.
    q Data
    do Pago No.
    T may ba nated hee thatJhe
    cmwding-ouw e stramgth a
    iaapas
    ensiivy imuestmentdahends
    umctisn
    an Jhu insos
    Sensitvity Jhomonay demand and mdorost
    gRater Jha valhe the intoerass unction Th
    Lnvestmeniunction andlowan anktivdyAh
    ha vabun g ha
    maneydemand umction gruahen w o h
    Chcwdmg Ot-Hpdamd vice
    venba

    You might also like