Crowding out | AP Macroeconomics | Khan Academy

[@parthshah2992]

During deep recession, crowding out is less likely to happen as private sector investment is already minimal and therefore there is only insignificant private spending to crowd out.

[@rseesr7743]

lmao having marco test 2 at 8 am in the morning and watching this at 2:10

[@rseesr7743]

macro*

[@dubyabalthazar4598]

Lmao

[@crouton394]

how'd you do?

[@rseesr7743]

@@crouton394 75% and letter grade A-

[@dohael8519]

Firstly i want Say thanks for your great informations ...but plz could you translate your speach to arabic or french coz i can't understand all your speach...plz i want benifit by your informations plz and thanks.

[@treytadel3502]

No Sal. This is wrong. The aggregate demand for loanable funds does not shift, bcz general consumers have received no incentive to demand more. It is the supply of funds that is soaked up from the huge gov't borrowing, causing the supply curve to shift upwards to the left. The shortage of loanable funds at each and every price (r) relative to existing demand causes r to increase.

[@callumh4639]

Glad someone picked up on this. I was so confused because all my study materials explained this as part of supply side economics

[@artemisrafti3956]

I believe this is incorrect. When the govt deficits spends, it is literally net crediting bank reserves and deposit accounts by the amount of the deficit. Aka, it is creating base money via keystrokes. Then why does the govt issue treasuries? To drain excess bank reserves that would otherwise cause the fed funds rate to collapse. The govt doesn’t borrow money at all, it is the issuer of the currency.

[@colmrobert5748]

Artemis Rafti so the video is correct? Both make sense, I’m just looking for a definite answer in regards to the actual economic theory.

[@artemisrafti3956]

@@colmrobert5748 The video is incorrect because it assumes a fixed pool of savings. When government spends, it adds to national income, which then increase savings since savings is a function of national income.

[@farahahmed01]

@@artemisrafti3956 so if the governent borrows according to u supply of loanable funds should fall? does that mean Money supply falls too???

[@mikemcyap]

When the govt runs a budget deficit, there is less public saving. Total saving in the economy is the sum of private and public savings. With less public saving, the supply curve in the loanable funds market shifts left. With the given demand curve, this sends the interest rate up. Private investment is then said to be "crowded out." The equilibrium loanable funds quantity is then less.

[@meetbhavsar1072]

Ty😊😊

[@henryrocks11]

But what would happen if a government decided to eliminate all government purchases funded by borrowing because they're worried about a deficit?

[@shankysays]

then economic development will freeze. gdp will freeze and then start going down.

[@RU1N3D.]

bit late mate@@shankysays

[@johnlama5577]

Great video!

[@lewirock6995]

Is there a way to explain this microeconomically ?

[@tylerandjsh1873]

thought that said coming out for a sec oof

[@KrDavidLee]

This video is wrong. Supply curve shifts to the left. An excerpt from Principles of Economics by N. Gregory Mankiw: "When the government runs a budget deficit, public saving is negative, and this reduces national saving. In other words, when the government borrows to finance its budget deficit, it reduces the supply of loanable funds available to finance investment by households and firms."

[@AprenderEconomia21]

This model is wrong, it doesn't understand that banks create money and that treasury pays in reserves. Chek Steve Keen for more insight on the endogenous money, as it has been recognized true by central banks themselves. Loanable funds is wrong.

[@aidanzhao2830]

AP Econ is just doing the basics bro

[@davidjacobs1413]

It’s a white curve not a blue curve, lol