Assuming the Crowding-Out Effect but No Multiplier or Investment-Accelerator Effects

question 28

Multiple Choice

Assuming the crowding-out effect but no multiplier or investment-accelerator effects, what is the effect of a $500 billion increase in government expenditures on the aggregate demand or supply?

• A)It shifts the aggregate demand right by more than $500 billion.
• B)It shifts the aggregate demand right by less than $500 billion.
• C)It shifts the aggregate supply left by more than $500 billion.
• D)It shifts the aggregate supply left by less than $500 billion.

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Definitions:

Disjunctive

Pertaining to a logical relation involving a choice between two or more alternatives, often expressed as an "or" statement in logic.

Ingredient

A component or element that is part of a larger mixture, recipe, or formula.

Categorical Proposition

A logical statement that relates two categories or classes in terms of inclusion, exclusion, or partial inclusion.

Universal

In logic, a universal statement is one that asserts something about every member of a particular category.