[cutedivyanka]

Would crowding out effect follow expansionary fiscal policy if money supply is
(a) exogenous
(b)endogenous

[niteesh21]

In economics, crowding out is any reductions in private consumption or investment that occurs because of an increase in government spending. If the increase in government spending is financed by a tax increase, the tax increase would tend to reduce private consumption. If instead the increase in government spending is not accompanied by a tax increase, government borrowing to finance the increased government spending would increase interest rates, leading to a reduction in private investment. There is some controversy in modern macroeconomics on the subject, as different schools of economic thought differ on how households and financial markets would react to more government borrowing