Suppose that Congress and the President are considering an increase in government expenditures of $50 billion....
Suppose that Congress and the President are considering an increase in government expenditures of $50 billion. They consult with two economists: Alan and Robert. Alan believes that the marginal propensity to consume (MPC) is 0.9 and Robert believes that it is 0.5 If Alan is correct, then the increase in government spending will cause GDP to increase by ____, and if Robert is correct, then the government spending increase will cause GDP to increase by ____ (B)
A. $450 billion, $250 billion
B.$500 billion, $100 billion
C.$250 billion, $150 billion
D.$150 billion, $250 billion
E.$45 billion, $25 billion
The answer is B, please explain why.
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Suppose that Congress and the President are considering an
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