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For each of the statements (or questions) below, explain why that statement is FALSE (or incorrect). Please focus specifically on what makes the statement wrong.

a. The multiplier effect diminishes the effect of an increase in govt. expenditures on aggregate supply, while the crowding out effect amplifies the effects on aggregate demand.

b. Why is the following sequence about the crowding out effect incorrect? Taxes up implies GDP down implies demand for money down implies equilibrium interest rate up implies quantity of goods and services demanded down.

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Nelly Stracke
Nelly StrackeLv2
17 Dec 2019
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