What Is the Crowding Out Effect? Using the AS/AD Model,demonstrate

question 8

Essay

What is the crowding out effect? Using the AS/AD model,demonstrate graphically and explain in words the impact of expansionary fiscal policy on the crowding out effect.

---

Definitions:

Creditors

Individuals or entities that a company owes money to because they have provided goods or services on credit.

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares, rather than cash.

Corporation's Assets

The resources owned by a corporation that have economic value and can be used to meet its financial obligations.

Preferred Stockholders

Preferred stockholders are investors who own shares of a company's preferred stock, which often provides fixed dividends and priority over common stockholders in asset liquidation.