Where Marginal Propensity to Consume Is Denoted as MPC,consider the Following

question 34

Essay

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.

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Definitions:

Parent Company

A parent company is a corporation that owns enough voting stock in another corporation (subsidiary) to control its board of directors and therefore its operations and policies.

Subsidiary

A company that is completely or partially owned and wholly controlled by another company, referred to as the parent company.

Voting Stock

Shares that give the shareholder a right to vote on company matters, such as electing the board of directors.

Control

The power to direct the financial and operating policies of a business with a view to gain economic benefits from its activities.