Question: PART A (i) Using an IS/LM diagram briefly explain the likely effects of a fiscal contraction on both the domestic interest rate and the level

PART A

(i) Using an IS/LM diagram briefly explain the likely effects of a fiscal contraction on both the domestic interest rate and the level of economic activity.

(ii) Using a second IS/LM diagram briefly explain the likely effects of a monetary contraction on both the domestic interest rate and the level of economic activity.

PART B

Explain the term "crowding out," giving four examples of crowding out effects.

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