Drawing diagram explain the process of “crowding out”. Also explain why the private sector might find budget deficit detrimental to their business planned projects.2. “Increase in net capital inflow will increase interest rates in the domestic loanable funds market” – do you agree with this statement? Explain by drawing a diagram and comment how you think investment will change if there is an increase in capital inflow.
Drawing diagram explain the process of “crowding out”. Also explain why the private sector might find budget deficit detrimental to their business planned projects.2. “Increase in net capital inflow will increase interest rates in the domestic loanable funds market” – do you agree with this statement? Explain by drawing a diagram and comment how you think investment will change if there is an increase in capital inflow.
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 8P
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Drawing diagram explain the process of “crowding out”. Also explain why the private sector might find budget deficit detrimental to their business planned projects.2. “Increase in net capital inflow will increase interest rates in the domestic loanable funds market” – do you agree with this statement? Explain by drawing a diagram and comment how you think investment will change if there is an increase in capital inflow.
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