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.