Assume the Multiplier Is 5 and That the Crowding-Out Effect

question 38

Multiple Choice

Assume the multiplier is 5 and that the crowding-out effect is $30 billion.An increase in government purchases of $20 billion will shift the aggregate-demand curve to the

• A)right by $130 billion.
• B)right by $70 billion.
• C)right by $50 billion.
• D)right by $10 billion.

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Definitions:

Nonpayers

Individuals who benefit from a good or service without contributing to its cost, often associated with public goods.

Nonrival in Consumption

A characteristic of some goods or services where one person's consumption does not reduce availability for others.

Marginal Cost

The additional cost incurred by producing one more unit of a product or service, a key concept used in decision-making and pricing strategies.

Public Good

A good that is non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from its use and one person's use does not reduce availability to others.