Which of the following tends to make aggregate demand shift right farther than the amount government expenditures increase?
A)the crowding-out effect
B)the multiplier effect
C)the wealth effect
D)the interest-rate effect

Question

Quizplus · Accepted Answer

The multiplier effect tends to make aggregate demand shift right farther than the amount government expenditures increase. This is because when the government spends money, it stimulates demand and leads to increased economic activity, which in turn leads to more spending and increased economic growth. The multiplier effect amplifies this initial increase in demand, leading to a larger overall shift in aggregate demand. The other three options (the crowding-out effect, the wealth effect, and the interest-rate effect) can also affect aggregate demand, but they do not tend to result in as large of a shift as the multiplier effect.

Which of the Following Tends to Make Aggregate Demand Shift