Where marginal propensity to consume is denoted as MPC,consider the following:
a.Assuming no crowding-out and MPC = 0.75,calculate the amount of government spending needed to bring this economy back to full-employment output.
b.Assuming no crowding-out and that $10 billion would be needed to bring this economy back to full-employment output,calculate the MPC in this economy.
Definitions:
Variable Level
Refers to an attribute or factor that can change in value over time or across different situations.
Specified Formula
A precisely defined mathematical equation or method used to solve a problem or determine an outcome.
Financial Asset
An intangible asset whose value is derived from a contractual claim, such as stocks, bonds, or bank deposits.
Debt Securities
Financial instruments that denote money owed by the issuer to the holder, typically involving regular interest payments and a return of principal at maturity.
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