Figure 34-6

question 29

Multiple Choice

Figure 34-6.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 34-6.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.

---

Definitions:

Independent Regulatory Commissions

Federal agencies created by Congress to regulate important areas of the nation's economy, designed to be independent from executive control.

Political Pressure

Influence or persuasion exerted by interest groups, political parties, or the public to achieve a desired political or policy outcome.

Civil Service

A sector of government composed mainly of career bureaucrats hired on professional merit rather than appointed or elected, whose role is to implement government policy.

Pendleton Act

A United States federal law enacted in 1883 which established that positions within the federal government should be awarded on the basis of merit instead of political affiliation.