Respuesta :
investment according to a monetarist economist will increase due to the crowding out effect .
Crowding out occurs when rising interest rates limit the initial growth in overall expenditure investment. Because government spending increases consumption and investment, while higher interest rates decrease initial overall investments.
If the economy is in short-run equilibrium at point 'a,' it might be achieved at point 'e' by implementing expansionary monetary policy, which will move AD from AD1 to AD2.
An expansionary monetary policy will cause the LM curve to move to the right, either through open market operations or by changing the discount rate. A movement in the LM curve causes a shift in the AD curve to the right, bringing the economy to the "e" long term level of equilibrium.
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