Distinguishcrowding-out effect also the ricardo barro effect

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Q. In 2008, India experienced a surge inflation exceeding 11 percent, large government deficits also rising interest rates. Most economists expected India's growth to slow. (10 marks)

a. Assume that the Indian government reduces its deficit also gets back to a balanced budget. If other things remain the same, elucidate how will the demand or supply of loan able funds in India change?

b. With economic growth forecasted to slow, future incomes are expected to fall. If other things remain the same, elucidate how will the demand or supply of loan able funds in India change?

c. Distinguish between the crowding-out effect also the Ricardo Barro effect. Elucidate how are the 2 effects related?

 

Reference no: EM1320615

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