When the Crowding-Out Effect of an Increase in Government Purchases

Multiple Choice

When the crowding-out effect of an increase in government purchases is included when analyzing the impact of the increase in government purchases, _____.

A) the AD curve shifts to the left, but by more than the simple multiplier analysis would imply
B) the AD curve remains unchanged
C) the AD curve shifts to the right, but by more than the simple multiplier analysis would imply
D) the AD curve shifts to the right, but by less than the simple multiplier analysis would imply
E) the AD curve shifts to the left, but by less than the simple multiplier analysis would imply