Suppose government spending rises by $120 billion.It follows that if private expenditures
A) rise by $120 billion,complete crowding out exists.
B) fall by $100 billion,incomplete crowding out exists.
C) remain unchanged,complete crowding out exists.
D) rise by more than $120 billion,complete crowding out exists.
E) b and c

Question

Quizplus · Accepted Answer

Incomplete crowding out occurs when private expenditures decrease by less than the increase in government spending, indicating that the rise in government spending is partially offset by a decrease in private spending.

Suppose Government Spending Rises by $120 Billion