If the multiplier is 6 and if there is no crowding-out effect, then a $60 billion increase in government expenditures causes aggregate demand to none of the above.
What is the crowding-out effect?
The crowding-out effect is an economic theory that claims that increased public spending reduces or eliminates private spending.
The crowding-out effect occurs when higher interest rates cause a decrease in private investment spending, dampening the initial increase in total investment spending.
Thus, the correct option is D, none of the above.
Learn more about the crowding-out effect
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