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Construct a model of loanable funds market in closed economy

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Reference no: EM13689177

Construct a model of loanable funds market in a closed economy.

a) Discuss the effect of an increase in the Government Budget Deficit on the rate of interest & the level of private investment. Identify the crowding out effect in this context.
b) Suppose that investment is perfectly interest inelastic. Discuss the crowding out effect for an increase in the govt. budget deficit.

Reference no: EM13689177

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