Assume the Multiplier Is 5 and That the Crowding-Out Effect

question 273

Multiple Choice

Assume the multiplier is 5 and that the crowding-out effect is $20 billion. An increase in government purchases of $10 billion will shift the aggregate-demand curve to the

• A)right by $150 billion.
• B)right by $70 billion.
• C)right by $30 billion.
• D)None of the above is correct.

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Definitions:

Terms

Conditions and stipulations that govern the agreement or contract between parties, often detailing the obligations, rights, and responsibilities of each party.

Automatic Dividend Reinvestment

A feature that allows shareholders to automatically use their dividend payments to purchase additional shares of the stock, usually without a commission.

Additional Shares

Newly issued stock by a company, which increases the total number of shares outstanding and dilutes the ownership percentage of existing shareholders.

Discounted Price

A reduced price from the original selling price, often used to stimulate sales or clear inventory.