Depending on the Size of the Multiplier and Crowding-Out Effects

question 201

True/False

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

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Definitions:

Substitute Good

Refers to a product or service that a consumer sees as the same or similar to another product, thus they can be used interchangeably.

Substitute Goods

Products or services that can be used in place of each other, where the consumption of one increases the likelihood of the other being consumed less.

Demand Curve

A graph showing the relationship between the quantity of a goods or services demanded and its price, usually downward sloping.

Price Increase

A rise in the cost of goods or services over time, affecting the purchasing power of money.