Suppose the government increases its purchases by Rs16 billion. If the multiplier effect exceeds the crowding out effect, then ?

A. The aggregate supply curve shifts to the right by more than Rs 16 billion
B. The aggregate demand curve shifts to the left by more than Rs 16 billion
C. The aggregate demand curve shifts to the right by more than Rs 16 billion
D. the aggregate supply curve shifts to the left by more than Rs 16 billion

Correct Answer: The aggregate demand curve shifts to the right by more than Rs 16 billion ✔

Last Updated: June 18, 2019