Figure 24-6

question 127

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 graphs are drawn to show the effects of an increase in government purchases.If it were not for the increase in r from r₁ to r₂,then

• A) there would be no crowding out.
• B) the full multiplier effect of the increase in government purchases would be realized.
• C) the AD curves that actually apply,before and after the change in government purchases,would be separated horizontally by the distance equal to the multiplier times the change in government purchases.
• D) All of the above are correct.

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Definitions:

Price Sellers Receive

The amount of money that producers get from selling one unit of a good or service, after considering all costs and expenses.

Consumer Surplus

The dissimilarity in what consumers intend to pay for a good or service versus what they actually spend.

Producer Surplus

The disparity between the minimum amount sellers are ready to take for a product or service and the actual price they get in the market.

Price Received

The amount of money paid to a seller or producer for a good or service, excluding any taxes, fees, or additional charges.