Figure 34-6

question 29

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 graphs are drawn to show the effects of an increase in government purchases.If it were not for the increase in r from r₁ to r₂,then

• A)there would be no crowding out.
• B)the full multiplier effect of the increase in government purchases would be realized.
• C)the AD curves that actually apply,before and after the change in government purchases,would be separated horizontally by the distance equal to the multiplier times the change in government purchases.
• D)All of the above are correct.

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