Suppose the multiplier is 5 and the government increases its purchases by $15 billion. Also, suppose the
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Question:
Suppose the multiplier is 5 and the government increases its purchases by $15 billion. Also, suppose the AD curve would shift from AD1 to AD2 if there were no crowding out; the AD curve actually shifts from AD1 to AD3 with crowding out. Also, suppose the horizontal distance between the curves AD1 and AD3 is $55 billion. The extent of crowding out, for any particular level of the price level, is:
a) $20 billion.
b) $30 billion.
c) $75 billion.
d) $40 billion.
Related Book For
Fundamentals of Financial Management
ISBN: 9780273713630
13th Revised edition
Authors: James van Horne, John Wachowicz
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