| In the transparenices, there is a page referring to two
anti-government positions implied by the classical model of crowding out.
If there is no crowding out (of investment) then private consumption is
reduced by an increase in government expdenture. A common political position
has been that old chestnut "private individuals know how to spend their
money better than the government does." Second, if there is crowding out,
rising government expenditures reduces further output (as in question 1
of problem set 2). |