Figure 34-7
(a) The Money Market
(b) The Aggregate Demand Curve
-Refer to Figure 34-7. Suppose the multiplier is 5 and the government increases its purchases by $15 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 $55 billion. The extent of crowding out, for any particular level of the price level, is

Question

Figure 34-7
(a) The Money Market
(b) The Aggregate Demand Curve

-Refer to Figure 34-7. Suppose the multiplier is 5 and the government increases its purchases by $15 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 $55 billion. The extent of crowding out, for any particular level of the price level, is

Quizplus · Accepted Answer

The Answer of Figure 34-7 (a) The Money Market (b) The Aggregate Demand Curve -Refer to Figure 34-7. Suppose the multiplier is 5 and the government increases its purchases by $15 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 $55 billion. The extent of crowding out, for any particular level of the price level, is A)$75 billion. B)$40 billion. C)$30 billion. D)$20 billion.