Question

QUESTION 10 Crowding out is a phenomenon: where overproduction in the goods market leads to a sharp drop in the agregate price level O in which an increase in the government's budget surplus decreases overall investment spending where an increase in the government's borrowing causes interest rates to rise, resulting in a decrease in private investment spending where an increase in imports causes the overall domestic production to fall QUESTION 11 If disposable income increases by $1,000 and consumption increases by 5400, the marginal propersky to consume is equal to QUESTION 12 If the MPC is 0.75, then the multiplier is:

Answer 1

a) "C"

Crowding out is a situation when the government borrowing increases the interest rate and reduce the private investment in the market, this is known as crowding out.

b) As the income increases by 1000 and the consumption increase by only 400 the MPC will be only 0.4 .

c) IF the MPC Is 0.75 the multiplier will be 1/1-MPC = 1 / 1 - 0.75 = 4.