figure below, with initial equilibrium at point A: fig0506 Question 41 options: 1) A larger government results in more output being produced but reduces consumption through negative income effect 2) As represented consumer pays higher taxes, disposable income falls, and in new equilibrium, he/she spends less on consumption goods and works harder to support a larger government 3) Private consumption is crowded out by government Purchases, but it is not completely crowded out because of the increase in output 4) The change in Government spending is the distance AE, and the change in consumption is the distance AD 5) no wrong answer 6) more than one answer are correct

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