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Which of the Following Sequences Best Represents the Crowding-Out Effect \uparrow \Rightarrow

Question 261

Multiple Choice

Which of the following sequences best represents the crowding-out effect?


A) government purchases \uparrow \Rightarrow GDP \uparrow \Rightarrow supply of money \darr\Rightarrow equilibrium interest rate \uparrow \Rightarrow quantity of goods and services demanded \darr

B) government purchases \darr\Rightarrow GDP \darr\Rightarrow demand for money \darr\Rightarrow equilibrium interest rate \darr\Rightarrow quantity of goods and services demanded \darr

C) government purchases \uparrow \Rightarrow GDP \uparrow \Rightarrow demand for money \uparrow \Rightarrow equilibrium interest rate \uparrow \Rightarrow quantity of goods and services demanded \darr

D) taxes \uparrow \Rightarrow GDP \darr\Rightarrow demand for money \darr\Rightarrow equilibrium interest rate \uparrow \Rightarrow quantity of goods and services demanded \darr

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