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QUESTION:
Suppose the government increases its purchases by $25 billion. If the multiplier effect exceeds the crowding-out effect, then _______.
a. the aggregate-supply curve shifts to the right by more than $25 billion
b. the aggregate-demand curve shifts to the left by more than $25 billion
c. the aggregate-supply curve shifts to the left by more than $25 billion
d. the aggregate-demand curve shifts to the right by more than $25 billion
ANSWER:
d. the aggregate-demand curve shifts to the right by more than $25 billion
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