How much of investment spending was crowded out?
Concept introduction:
Planned Investment Spending (I): It refers to the amount that the private sector firms plan to spend on inventory and purchase of capital goods during a given period of time.
Marginal Propensity to Consume (MPC): MPC refers to the proportion of the total increase in disposable income that households devote to consumption.
Spending Multiplier: It is a measure of the extent to which
Crowding Out: Interest rates rise when government finances its increased expenditure through borrowings. Crowding out refers to the decrease in planned investment spending resulting from the increased interest rates.
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