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Sunday, May 10, 2020

ALL Crowding-Out FRQ's

ALL Crowding-Out FRQ's


Understand that the College Board doesn't use the phrase Crowding-Out 
in the FRQ's but when Government (Deficit) Spending increases
it reduces the SLF or increases the DLF driving up the RIR (Real Interest Rate)
Private Investment is Crowded-Out of the Loanable Funds Market
In essence, these investors can't get cheap loans to create factories, equipment etc 
all because of the government borrowing
also,, taking it a step further

In the Long-Run
when RIR's increase there is less investment
less capital formation and less LR Growth



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