Business, 19.03.2021 14:00 JOEFRESH10
10. Crowding out effect
Suppose economists observe that an increase in government spending of $9 billion raises the total demand for goods and services by $45 billion.
If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be4/5 .
Now suppose the economists allow for crowding out.
Their new estimate of the MPC would be (larger, smaller) than their initial one.
Answers: 3
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10. Crowding out effect
Suppose economists observe that an increase in government spending of $9 bi...
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