Question

Place the events in sequence to describe how crowding- out happens. Start by clicking the first item in the sequence or dragging it here Drag the items below into the box above in the correct order, starting with the first item in the sequence
Because of a recession, consumers have less disposable income to spend on durable goods, like cars.
A state government passes a stimulus package that sends aid to struggling car manufacturing firm in the state.
Despite the increase in spending, aggregate demand has not increased as much as expected Car manufacturers use government funding, instead of their own money, to invest in improving their machinery

Answer 1

Crowding-out effect in this context, is used to describe a situation wherein the  Gross Domestic Product (GDP) equation, government spending triggers a reduction in or completely replaces private spending or investment.

For instance, when the government is heavily invested in spending on certain sectors, private investors may be discouraged from investing or spending in the same sectors.

The correct sequence of how crowding-out can occur is given below:

1.      Because of a recession, consumers have less disposable income to spend on durable goods, like cars.

2.     A state government passes a stimulus package that sends aid to struggling car manufacturing firms in the state.

3.      Car manufacturers use government funding, instead of their own money, to invest in improving their machinery

4.       Despite the increase in spending, aggregate demand has not increased as much as expected

Notice that because the government releases stimulus packages to assist Car manufacturers, there is a shortfall in the anticipated increase in aggregate demand because car manufacturers are not spending their money to improve their conditions.

This, exactly, is what Crowding Out Effect achieves. Read more about this in the link below:

https://brainly.com/question/7455899