Assume that the MPC is 0.8. Assume that there is a multiplier effect and that the total crowding-out effect is $8 billion. How will an increase in government purchases of $10 billion shift aggregate demand? a. It will shift aggregate demand right by $2 billion. b. It will shift aggregate demand left by $42 billion. c. It will shift aggregate demand right by $42 billion. d. It will shift aggregate demand left by $2 billion 4

Assume that the MPC is 0.8. Assume that there is a multiplier effect and that the total crowding-out effect is $8 billion. How will an increase in government purchases of $10 billion shift aggregate demand? a. It will shift aggregate demand right by $2 billion. b. It will shift aggregate demand left by $42 billion. c. It will shift aggregate demand right by $42 billion. d. It will shift aggregate demand left by $2 billion 4

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 4SQP

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Assume that the MPC is 0.8. Assume that there is a multiplier effect and that the total crowding-out effect is $8 billion. How will an increase in government purchases of $10 billion shift aggregate demand?
a. It will shift aggregate demand right by $2 billion.
b. It will shift aggregate demand left by $42 billion.
c. It will shift aggregate demand right by $42 billion.
d. It will shift aggregate demand left by $2 billion.

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