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Expansionary Policies: Comparing Effects on Inflation and Investment

Explore the impact of expansionary policies on inflation and investment, including the concepts of "crowding out" and "liquidity trap." Understand how government deficit spending affects these economic factors.

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Expansionary Policies: Comparing Effects on Inflation and Investment

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Presentation Transcript

  1. CMT and KT compared Effects of expansionary policies 1inflation is a general increase of prices 2“crowding out” describes the idea that increases of government deficit spending result in lower Investment 3 A “liquidity trap” describes a casewhere banks would rather hold money than lend it.

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