Assuming the Crowding-Out Effect but No Multiplier or Investment-Accelerator Effects

question 60

Multiple Choice

Assuming the crowding-out effect but no multiplier or investment-accelerator effects, what is the effect of a $600 billion increase in government expenditures on the aggregate demand or supply?

• A) It shifts the aggregate demand right by more than $600 billion.
• B) It shifts the aggregate demand right by less than $600 billion.
• C) It shifts the aggregate supply left by more than $600 billion.
• D) It shifts the aggregate supply left by less than $600 billion.

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Definitions:

U.S. Currency Value

The worth or purchasing power of the United States dollar in domestic and international markets.

Saudi Arabian Riyals

The official currency of Saudi Arabia, used for all financial transactions within the country.

U.S. Dollars

The official currency of the United States, commonly represented by the symbol $.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.