Suppose There Are Both Multiplier and Crowding Out Effects but Without

question 276

Multiple Choice

Suppose there are both multiplier and crowding out effects but without any accelerator effects. An increase in government expenditures would definitely

• A)shift aggregate demand right by a larger amount than the increase in government expenditures.
• B)shift aggregate demand right by the same amount as an the increase in government expenditures.
• C)shift aggregate demand right by a smaller amount than the increase in government expenditures.
• D)Any of the above outcomes are possible.

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Definitions:

Allocative Efficiency

Allocative Efficiency occurs when resources are distributed in a way that maximizes the net benefit to society, ensuring that the right goods are produced to meet consumer preferences.

Productive Efficiency

A situation where an economy or a production process is operating in such a way that it could not produce more of one good without producing less of another.

Profit-Maximizing

This is the process by which a company adjusts its production levels and pricing strategies to achieve the highest possible profit.

Short Run

A period in which at least one input is fixed and cannot be changed by the firm.