FIGURE 2. -------------- AD2 AD3 AD1 Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 billion. Also, suppose the AD curve would shift from AD1 to AD2 if...

Extracted text: FIGURE 2. -------------- AD2 AD3 AD1 Refer to Figure 2. Suppose the multiplier is 3 and the government increases its purchases by $25 billion. Also, suppose the AD curve would shift from AD1 to AD2 if there were no crowding out; the AD curve actually shifts from AD1 to AD3 with crowding out. Finally, assume the horizontal distance between the curves AD1 and AD3 is $40 billion. The extent of crowding out, for any particular level of the price level, is $15 billion O $35 billion O $95 billion $40 billion