Macroeconomics

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During the 1990s, the size of the federal government debt
became so large that servicing the interest payments became a
significant portion of total federal expenditure. In response, many
representatives and senators felt that the federal deficit needed to
be reduced. If government spending (G) becomes negatively sensitive
to changes in the interest rate, what effect does this have on
autonomous consumption and planned investment that is crowded out? If
autonomous taxes (Ta) become positively sensitive to changes in the
interest rate, what effect does this have on the amount of autonomous
consumption and planned investment that is crowded out?

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