If the government increases its purchases by $16 billion and the multiplier effect exceeds the crowding-out effect, this means that the initial increase in government spending leads to a larger overall increase in aggregate demand due to the multiplier effect.
The crowding-out effect refers to the reduction in private sector spending that can occur when the government increases spending, particularly if it leads to higher interest rates. However, if the multiplier effect (which boosts aggregate demand beyond the initial increase) is stronger than the crowding-out effect (which dampens it), the overall effect on aggregate demand will be greater than the initial increase in government spending.
Therefore, the correct answer is:
b. the aggregate-demand curve shifts to the right by more than $16 billion.