Figure 24-6

question 275

Multiple Choice

Figure 24-6.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 24-6.Suppose the multiplier is 3 and the government increases its purchases by $25 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out; the AD curve actually shifts from AD₁ to AD₃ with crowding out.Finally,assume the horizontal distance between the curves AD₁ and AD₃ is $30 billion.The extent of crowding out,for any particular level of the price level,is

• A) $25 billion.
• B) $30 billion.
• C) $45 billion.
• D) $60 billion.

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Definitions:

Lecompton Constitution

A proposed Kansas state constitution (1857) supporting slavery; it was ultimately rejected after much controversy.

Proslavery Constitution

A constitution or constitutional amendments that legitimize or promote the practice of slavery, often used to refer to historical documents in the United States prior to the Civil War.

Kansas

A U.S. state located in the Midwestern region, known for its contributions to agricultural outputs, such as wheat and corn.

Free Labor Ideology

The belief that labor should be free to choose where and for whom they work, contrasting with the system of slavery.