Question

The multiplier effect a. diminishes the effects of an increase in government expenditures, while the crowding-out effect amplifies the effects. b. and the crowding-out effect both amplify the effects of an increase in government expenditures. c. and the crowding-out effect both diminish the effects of an increase in government expenditures. d. amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.

Answer 1

d. amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.

Step-by-step explanation:

The multiplier effect amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects. The multiplier effect refers to the increase in spending that results in snowball effects on other aspects of the economy. On the other hand, the crowding-out effect diminishes the effects.