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Figure 21-6

Question 289

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Figure 21-6. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs. Figure 21-6. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs.   -Refer to Figure 21-6. Suppose the multiplier is 5 and the government increases its purchases by $10 billion. Also, suppose the AD curve would shift from AD<sub>1</sub> to AD<sub>2</sub> if there were no crowding out; the AD curve actually shifts from AD<sub>1</sub> to AD<sub>3</sub> with crowding out. Also, suppose the horizontal distance between the curves AD<sub>1</sub> and AD<sub>3</sub> is $20 billion. The extent of crowding out, for any particular level of the price level, is A) the horizontal distance between the curves MD<sub>1</sub> and MD<sub>2</sub>. B) $40 billion. C) $30 billion. D) $20 billion.
-Refer to Figure 21-6. Suppose the multiplier is 5 and the government increases its purchases by $10 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 $20 billion. The extent of crowding out, for any particular level of the price level, is


A) the horizontal distance between the curves MD1 and MD2.
B) $40 billion.
C) $30 billion.
D) $20 billion.

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