If the marginal propensity to consume is 0.75, and there is no investment accelerator or crowding...

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If the marginal propensity to consume is 0.75, and there is no investment accelerator or crowding out, a $120 billion increas

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Answer 1

Answer #1

Here mpc = 0.75 DGS = change in Govt. Spending $120 c DADE change in Agg. demanda - 2 DAD (D65) ( mpС 2 (1075) (120) 4x 120 D

Crowding out is a phenomenon that arises when there is is government deficit spending increase and this will lead to have less business and private investmentin the economy

There is no investment accelerator or crowding out so the effect would be smaller if there were and investment accelerator

The correct answer here is option C

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Answer 2

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