Suppose the economy is in equilibrium at point B which is below the full-employment output of point D. If the government implements fiscal policy targeted at moving real GDP back to point D, but crowding out significantly reduces the effectiveness of the fiscal policy, the equilibrium point will likely end up closer to point   Multiple Choice A B C D

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
ChapterD: The Expenditure-output Model
Section: Chapter Questions
Problem 18RQ: Exercise D18 How do economists use the multiplier?
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Suppose the economy is in equilibrium at point B which is below the full-employment output of point D. If the government implements fiscal policy targeted at moving real GDP back to point D, but crowding out significantly reduces the effectiveness of the fiscal policy, the equilibrium point will likely end up closer to point

 

Multiple Choice

A

B

C

D

Price Level
A
B
C
D
St
AS
AD3
AD 2
AD₁
ADO
Real GDP
Transcribed Image Text:Price Level A B C D St AS AD3 AD 2 AD₁ ADO Real GDP
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