Question

eco 203 In the __________ view, there are ample loanable funds available at the current interest rate. When G increases, no crowding out occurs, interest rates do not rise, and aggregate expenditures rise by the full amount of G.

Answer 1

The answer is "In the classical view, there are ample loanable funds available at the current interest rate. When G increases, no crowding out occurs, interest rates do not rise, and aggregate expenditures rise by the full amount of G."

Step-by-step explanation:

In the classical view, the capital market will find the balance between the demanded investment quality and the supplied savings one itself. However, in the Keynesian view, for example during a recession, government spending (G) will increase and there will be a competition to acquire available capital supply, that leads to the crowding out occurs and the general interest rate increases.