-Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is complete crowding out.As a result,the aggregate demand (AD)curve in the exhibit A) will maintain its present position at AD_1. B) will shift rightward,ideally so that it goes through point 2. C) will shift rightward,ideally so that it goes beyond point 2. D) will shift leftward. E) does not shift,but the SRAS curve will shift rightward so that it goes through point 3.

Question

Quizplus · Accepted Answer

When there is complete crowding out due to a government spending increase, the increase in government spending is offset by a decrease in private spending, leaving the aggregate demand unchanged.