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    Describe the crowding out and explain why it occurs in the IS/LM model. Explain why the crowding out does not occur in the simple Keynesian model and why it is nil if the economy is in the liquidity trap.

    can anyone give a clue? why crowding out only occurs in IS/LM but not Keynesian? and about the liquidity trap?:confused:

    Thank you very much.
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    anyone.............????????
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    no one...................?????????? ?
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    now i only need to konw why it is nil if the economy is in the liquidity trap?

    anyone.......??
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    I think it's because asset prices are so low, people willingly hold the government debt/money created, and will either spend this money or just hold it.

    So why is the simple Keynesian, so simple? Does it completely ignore the monetary side, and assumes a fixed price.
 
 
 
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