FIGURE 2. AD2 AD3 AD1 Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 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. Finally, assume the horizontal distance between the curves AD1 and AD3 is $40 billion. The extent of crowding out, for any particular level of the price level, is $15 billion $35 billion O $95 billion $40 billion
FIGURE 2. AD2 AD3 AD1 Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 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. Finally, assume the horizontal distance between the curves AD1 and AD3 is $40 billion. The extent of crowding out, for any particular level of the price level, is $15 billion $35 billion O $95 billion $40 billion
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section11.A: Graphical Treatment Of Taxes And Fiscal Policy
Problem 3TY
Related questions
Question
![FIGURE 2.
--------------
AD2
AD3
AD1
Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 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. Finally, assume the horizontal distance between the curves AD1 and AD3 is $40 billion. The extent of crowding out, for any
particular level of the price level, is
$15 billion
O $35 billion
O $95 billion
$40 billion](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F68cd83ae-2f49-4a82-8efc-6431a168b848%2F3e528079-6f8b-425e-bd98-6d6a3a92088d%2Fitkcm1v_processed.jpeg&w=3840&q=75)
Transcribed Image Text:FIGURE 2.
--------------
AD2
AD3
AD1
Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 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. Finally, assume the horizontal distance between the curves AD1 and AD3 is $40 billion. The extent of crowding out, for any
particular level of the price level, is
$15 billion
O $35 billion
O $95 billion
$40 billion
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