Complete crowding out implies that as the government increases purchases by $1,
a. private spending decreases by $1.
b. real GDP remains unchanged.
c. there is an equal offsetting decrease in one or more of the components of private expenditures.
d. All of the above
e. None of the above
Related textbook solutions
Related questions
1. The multiplier helps explain
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A. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes. |
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B. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment. |
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C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending. |
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D. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.
2. If the marginal propensity to save (MPS) increases, the multiplier
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