56722114698940471341447 9781337096546 5% MINDTAP Problems & Applications (Ch 34)

Question

56722114698940471341447 9781337096546 5% MINDTAP Problems & Applications (Ch 34) Due on Agr 23 at 11 59 PM CDT Back to Assignment ttempts: Average: 0/2 Problems and Applications Q7 Suppose economists observe that an increase in government spending of $14 biltion raises the total demand for goods and services by $42 billion. f these economists ignore the possibility of crowding out, they weuld estimate the marginal propensity to consume (MPC) to beY Now suppose the economists allow for crowding out. Their new estimate of the MPC would be Y than their initial one ?? F F2 F3 F FS F6

Explanation / Answer

The correct answer is as follows:

42 = 14 / (1 - MPC)

MPC = 0.67

Their new estimate of the MPC would be larger than their initial one.

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