How Do the Multiplier Effect and the Crowding-Out Effect Change

question 123

Multiple Choice

How do the multiplier effect and the crowding-out effect change the consequences of an increase in government spending?

• A) They both amplify the consequences.
• B) They both diminish the consequences.
• C) The multiplier effect diminishes the consequences, while the crowding-out effect amplifies the consequences.
• D) The multiplier effect amplifies the consequences, while the crowding-out effect diminishes the consequences.

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Definitions:

Bell Shaped

Descriptive of a graph or distribution which is symmetrical and has its highest point in the middle, tapering off evenly on both sides, characteristic of a normal distribution.

Normal Distribution

A bell-shaped probability distribution characterized by its mean and standard deviation, frequently occurring in nature and statistics.

Symmetric

A characteristic of an object or a distribution in which it is identical in shape on both sides of a central axis.

Skewed

Describing a distribution that is not symmetrical, where one tail is longer or fatter than the other, indicating a deviation from the normal distribution.