Suppose the current level of output is 5000. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, a 10% increase in capital combined with a 5% increase in labor and a 5% increase in productivity would increase the current level of output to

Crowding out is a phenomenon focused upon most by the macroeconomists of whereby a government deficit interest rates, which in turn private investment spending. this group also believed that fiscal policy is the only thing that can lower natural unemployment. is just as effective in countering recessions as monetary policy. can be used most of the time, but monetary policy becomes a better option when velocity is fluctuating. should be used only if the central bank follows a monetary policy rule. faces problematic lags in propagating changes throughout the economy.