-Refer to the Above Figure

question 147

Multiple Choice

-Refer to the above figure.If the economy is at E and the government wants to increase aggregate demand to ,but the increase in spending only shifts the aggregate demand curve to ,then

• A)complete crowding out has occurred.
• B)some crowding out has occurred.
• C)the increased borrowing caused interest rates to fall.
• D)the short-run aggregate supply curve is steeper than the figure indicates.

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Definitions:

Spillover Effects

Spillover Effects are unintended consequences of an economic activity that affect third parties who are not directly involved in the activity itself.

Nonconsenting Third Parties

Nonconsenting third parties are individuals or groups that are affected by the actions of others without having agreed to or participated in the decision-making process.

Externalities

Costs or benefits that affect a party who did not choose to incur those costs or benefits, often leading to market failure if not addressed.

Allocation of Resources

The process of distributing available resources among various uses or projects in order to achieve desired outcomes or maximize efficiency.