Figure 34-6

question 171

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.

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Definitions:

Conditioned Response

A response that is acquired after a previously neutral stimulus becomes linked with a stimulus that naturally induces a reaction.

Extinction

In behavior psychology, the gradual weakening and eventual disappearance of a conditioned response tendency.

Cravings

Intense desires or urges for specific substances or experiences, often associated with addiction and withdrawal.

Quit Smoking

The process of stopping the habit of smoking tobacco products, often involving withdrawal symptoms and requiring significant effort and support.