Multiple Choice
Assume that the MPC is 0.8. Assume that there is a multiplier effect and that the total crowding-out effect is $8 billion. How will an increase in government purchases of $10 billion shift aggregate demand?
A) It will shift aggregate demand left by $2 billion.
B) It will shift aggregate demand left by $42 billion.
C) It will shift aggregate demand right by $2 billion.
D) It will shift aggregate demand right by $42 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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