Suppose economists observe that an increase in government spending of $14 billion raises the total demand for goods and services by If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be Now suppose the economists allow for crowding out. Their new estimate of the MPC would be than their initial one.

Brief Principles of Macroeconomics (MindTap Course List)
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Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
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Suppose economists observe that an increase in government spending of $14 billion raises the total demand for goods and services by $70 billion.
If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be
Now suppose the economists allow for crowding out.
Their new estimate of the MPC would be
than their initial one..
Transcribed Image Text:Suppose economists observe that an increase in government spending of $14 billion raises the total demand for goods and services by $70 billion. If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be Now suppose the economists allow for crowding out. Their new estimate of the MPC would be than their initial one..
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