Asked by
Gilly Cavazos
on Nov 16, 2024
Verified
Suppose there are both multiplier and crowding out effects but without any accelerator effects. An increase in government expenditures would
A) always shift aggregate demand right by a larger amount than the increase in government expenditures.
B) always shift aggregate demand right by the same amount as the increase in government expenditures.
C) always shift aggregate demand right by a smaller amount than the increase in government expenditures.
D) shift aggregate demand right by a larger, equal, or smaller amount than the increase in government expenditures.
Multiplier Effect
The relative change in net income resulting from an addition or reduction in expenditure.
Crowding out
A situation in economics where increased government spending displaces private sector spending, either through higher taxes, higher interest rates, or borrowing.
Government Expenditures
The spending by the government sector on goods and services, including public services and public investment.
- Acquire knowledge about the multiplier effect and its mechanism in the economy.
- Comprehend the influence of the crowding-out effect on fiscal policy and investment dynamics.
Verified Answer
KV
Learning Objectives
- Acquire knowledge about the multiplier effect and its mechanism in the economy.
- Comprehend the influence of the crowding-out effect on fiscal policy and investment dynamics.