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:

Main Purpose Rule

A legal principle that exempts a guarantor from the requirement of a written contract if the primary intent of the guarantee is to serve the guarantor's own interests.

Debtor

An individual or entity that owes money to another party.

Foreclosure Proceeding

A legal process by which a lender seeks to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as the collateral for the loan.

Redeem

To recover possession of something by paying a specified amount, or to fulfill a promise or obligation.