Suppose the government increases government purchases and there is some crowding out. As a result
A) the rightward shift of the aggregate demand curve due to increased government purchases is reinforced by the crowding out effect.
B) the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect.
C) the rightward shift of the aggregate demand curve due to increased government purchases is completely offset by the crowding out effect.
D) the aggregate demand curve shifts right due to increased government purchases and the short- run aggregate supply curve shifts left due to the crowding out effect.
Ans: B) the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect.
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Should regular saving be an item in your personal budget?
What will be an ideal response?