Figure 34-6

question 95

Multiple Choice

Figure 34-6.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
-Refer to Figure 34-6.Suppose the multiplier is 3 and the government increases its purchases by $25 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out;the AD curve actually shifts from AD₁ to AD₃ with crowding out.Finally,assume the horizontal distance between the curves AD₁ and AD₃ is $40 billion.The extent of crowding out,for any particular level of the price level,is

• A)$15 billion.
• B)$40 billion.
• C)$35 billion.
• D)$95 billion.

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Definitions:

Total Liabilities

The aggregate of all debts and obligations owed by a company, reported on the balance sheet.

Shareholders' Equity

Represents the residual interest in the assets of a corporation after deducting liabilities, essentially the net worth belonging to shareholders.

Total Assets

The aggregate of all financial resources owned by a company, including current and non-current assets, which reflects its total economic value.

Statement Of Income

A financial document showing a company's revenue, expenses, and profits over a specific period, also known as an income statement.