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

question 60

Multiple Choice

Assuming the crowding-out effect but no multiplier or investment-accelerator effects, what is the effect of a $600 billion increase in government expenditures on the aggregate demand or supply?

• A) It shifts the aggregate demand right by more than $600 billion.
• B) It shifts the aggregate demand right by less than $600 billion.
• C) It shifts the aggregate supply left by more than $600 billion.
• D) It shifts the aggregate supply left by less than $600 billion.