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Business, 26.11.2019 20:31 nbug2121

Currently, a government's budget is balanced. the marginal propensity to consume is 0.75. the government has determined that each additional $10 billion in new government debt it issues to finance a budget deficit pushes up the market interest rate by 0.20 percentage points. it has also determined that every 0.10 (one-tenth) percentage-point change in the market interest rate generates a change in planned investment expenditures equal to $1 billion. finally, the government knows that to close a recessionary gap and take into account the resulting change in the price level, it must generate a net rightward shift in the aggregate demand curve equal to $250 billion.

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