What is "crowding out" effect? (1 Viewer)

[yma]

It's something about the fiscal policy, right? But I can't find it in the textbook


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[nerdasdasd]

Crowding out effect : the offset in aggregate demand that results when expansionary fiscal policies induces the RBA to increase interest rates

 

[nerdasdasd]

Government increases spending > higher aggregate demand > higher inflation > RBA INCREASES RATES > Borrowing more expensive > demand for investment falls

 

[yma]

Government increases spending > higher aggregate demand > higher inflation > RBA INCREASES RATES > Borrowing more expensive > demand for investment falls

It is demand for domestic investment falls, right? As a result, investors will invest overseas, right?


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[nerdasdasd]

It is demand for domestic investment falls, right? As a result, investors will invest overseas, right?


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Yes

 

[yma]

Yes

Oh I see thank you!


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[seventhroot]

when things get over crowded

 

[Chocolatebubble]

When the govt enters the market as a buyer and then increases interest rates to massively high levels to get funds and the investors are like D: nope and effectively get pushed out and can't invest domestically because of it.

then theres international crowding out where the high aud prevents investment

 

[seventhroot]

When the govt enters the market as a buyer and then increases interest rates to massively high levels to get funds and the investors are like D: nope and effectively get pushed out and can't invest domestically because of it.

then theres international crowding out where the high aud prevents investment

lel