Explain how the multiplier and crowding-out effect impact

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Reference no: EM131392525

Which of the following helps explain how the multiplier and crowding-out effect impact the size of the shift in aggregate demand from a tax change.

a. ?Tax cuts stimulate consumer spending, earnings and profits rise, which further stimulates consumer spending—the multiplier effect.

b. ?The higher income leads to an increase in the demand for money, which tends to lead to higher interest rates.

c. ?The higher interest rates make borrowing more costly and reduce investment spending—the crowding-out effect.

d. ?All of the above

Reference no: EM131392525

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