The federal government decides to stimulate the economy and increases government expenditure on new infrastructure projects by 110 billion. The marginal propensity to consume is MPC-0.3 and the marginal propensity to import is MPI 0.05. Suppose the crowding-out effect is twice the amount of government spending, what is the change in output caused by the stimulus package of 110 billion in a closed economy?

The federal government decides to stimulate the economy and increases government expenditure on new infrastructure projects by 110 billion. The marginal propensity to consume is MPC-0.3 and the marginal propensity to import is MPI 0.05. Suppose the crowding-out effect is twice the amount of government spending, what is the change in output caused by the stimulus package of 110 billion in a closed economy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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