Lesson 2: The Multiplier Effect & Crowding Out

Duration of Days: 3

Lesson Objective

Students will explain the multiplier effect and analyze how government spending can crowd out private investment.

Why does initial spending have a multiplied impact?

How can government borrowing affect interest rates and investment?

C3: D2.Eco.14.9-12 (Analyze government fiscal policies)

CCSS: RH.11-12.2

DOK 3 – Strategic Thinking
Students apply multiplier logic to fiscal policy scenarios and explore limitations such as crowding out.

Step-by-step numerical examples

Visual flowcharts

Partner problem-solving

Short written scenario analysis