The Multiplier Effect Suggests That the Increase in Aggregate Demand

question 49

True/False

The multiplier effect suggests that the increase in aggregate demand could be smaller than the increase in government purchases, while the crowding-out effect suggests that the increase in aggregate demand could be larger than the increase in government purchases.

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Definitions:

Total Revenue

Total Revenue is the full amount of money received by a company for its goods or services, before any expenses are subtracted.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded in a market.

Quantity Demanded

The total amount of goods or services that consumers are willing and able to purchase at a given price level.

Demand

The amount of a particular good or service that consumers are willing and able to purchase at various prices during a certain period of time.