Explain the concept of crowding in. What will be an ideal ...

[james]

Explain the concept of crowding in.
 
  What will be an ideal response?

Question 2

When the GDP is measured using adjustments for price changes it is known as the
 
  A) real GNP. B) nominal GDP. C) real GDP. D) nominal GNP.

[aloop]

Answer to Question 1

Crowding in occurs when a government decreases spending. If the level of output is fixed, when the government reduces spending, other spending components of GDP will increase. In a closed economy, consumption and investment could increase. In an open economy, consumption, investment and net exports could all increase.

Answer to Question 2

C