Figure 24-6

Multiple Choice

Figure 24-6.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 24-6.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.