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    I am confused, as the banks loan savings (minus what they keep as part o the reserve requirement) so why would this not increase the GDP and be factored in the multiplier?

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    Because if people save their money, they are left with less disposable income to spend which decreases consumption and would therefore decrease the multiplier in the economy.
    Unless more people want to borrow money, the amount of reserves the banks have isn't relevant.
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    Yeah I get that the more saved the less consumed, but if we are looking at the loan-able fund market if you inject money into the economy say through G. Then all that people save will increase the supply of loan-able funds decreasing the interest rate thus increasing the amount that firms will invest, so this investment will increase the GDP so why isn't this included in the multiplier.

    But if that is correct then how does the crowding out work, because isn't crowding out meant to be when Planned expenditure increases it needs to be funded so this puts pressure on money market and causes an increase in interest rates in order to acquire the funds to fund the injection, thus decreasing investment to increase Government spending.
 
 
 
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