1. What are the ways or reasons under which ?scal de?cits can crowd out private expenditures in the determination of aggregate demand? In this discussion, do not forget the Ricardian equivalence theorem.
2. In the IS-LM model, discuss how each of the following affect the relative ef?cacy of monetary and ?scal policies:
(a) the interest elasticity of money demand;
(b) the interest elasticity of investment;
(c) the income elasticity of money demand.
3. "It makes no difference whether government expenditures are ?nanced by taxes or bonds." Specify a theoretical basis for this statement. Provide at least two reasons why it may not hold.