Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding out, then GDP would have
A) increased by more than $100 billion.
B) increased by less than $100 billion.
C) increased by $100 billion.
D) not increased.

Question

Quizplus · Accepted Answer

Full crowding out implies that the increase in government spending is completely offset by a decrease in private sector spending, resulting in no net change in GDP.

Assume That If There Were No Crowding Out, an Increase