Question: Define crowding out. Give a hypothetical numerical example to show the difference between complete crowding out and incomplete crowding out. Explain how complete a nd

  1. Define crowding out. Give a hypothetical numerical example to show the difference between complete crowding out and incomplete crowding out. Explain how complete and incomplete crowding out could impact the effectiveness of fiscal policy. (15 marks)
  2. Explain the process by which the banking system creates money and how much it can be created? (10 marks)

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