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Determine extent of crowding out of private investment

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Suppose the IS curve for Fiji is Y = 2500-125i and the LM is Y = 1000+25i.Use Cramer's rule to determine i* and Y*. Now suppose the Fijian Government increased spending by $100m. Determine the extent of crowding out of private investment and the increase in Ms required to dampen any crowding-out effect. You are given the following parameters: αG = 2.5, h = 65, k = 0.5, b = 50.

Reference no: EM132501323

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