Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion. a. If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? b. Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than their initial one?

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A: Answer; = $ 90 billion

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A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: 10. Crowding out effect Suppose economists observe that an increase in government spending of $9…

A: Marginal propensity to consume refers to change in consumption divided by change in income.

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A: Please find the answer below.

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A:

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A: Given, MPC = 0.60

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Q: crowding out

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Q: Suppose economists observe that an increase in government spending of $10 billion raises the total…

A: Marginal propensity to consume (MPC) refers to the level of additional consumption expenditure due…

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A:

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