When the Crowding-Out Effect of an Increase in Government Purchases

question 63

Multiple Choice

When the crowding-out effect of an increase in government purchases is included in the analysis,what is the effect on AD?

• A)AD shifts right, but by less than the simple multiplier analysis would imply.
• B)AD doesn't change.
• C)AD shifts left.
• D)AD shifts right, but by more than the simple multiplier analysis would imply.

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Definitions:

Causal Event

A causal event is an occurrence that directly influences the outcome of another event, implying a cause-and-effect relationship between two or more events.

Prior Understandings

The pre-existing knowledge and experiences that an individual brings to a new learning situation.

Control Processes

Mental and behavioral mechanisms by which individuals regulate their thoughts, emotions, and actions in pursuit of goals.

Information-Processing Theorists

Scholars who study how human beings process information, including how they perceive, analyze, store, and recall information.