Suppose that real GDP is initially $14 trillion and the government attempts to increase real GDP to $15 trillion. The marginal propensity to consume is 0.8, and every $1.00 increase in real government spending crowds out $0
50 in real planned investment expenditures. Which increase in government spending below could yield the desired level of real GDP?
A) $200 billion B) $125 billion C) $100 billion D) $400 billion
D
You might also like to view...
Which of the following is true regarding this statement? "The president's decision to spend more money on national defense is smart."
A) This is a normative statement. B) The federal government does not face scarcity. C) This topic would be studied in microeconomics. D) Social interest must always be more important than self-interest. E) Ceteris paribus does not apply to the government.
Anna's Antiques expects to get two bidders for the unique china teacup it sells. Each of the bidders can either have a high-value of $100 or a low-value of $70 with equal probability. If Anna holds an auction between the two customers, the expected value of this auction is
a. $70 b. $78 c. $85 d. $100