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:

Stagnation

A period or state of little or no growth or activity.

Crisis

Marcia’s term for the period of conscious decision making related to identity formation.

Gusii

An ethnic group in Kenya known for their distinct cultural practices and language.

Expectations

Beliefs or anticipations about the way events or situations are supposed to unfold in the future.