If the Crowding-Out Effect Is Complete and the Marginal Propensity

question 261

Multiple Choice

If the crowding-out effect is complete and the marginal propensity to save is 0.25, then an increase in government spending of $100 billion will generate how much more real GDP?

• A)$0
• B)$25 billion
• C)$100 billion
• D)$400 billion

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Definitions:

Recall

The mental process of retrieving information from the past.

Preschooler

A child who is in the developmental stage between toddlerhood and school age, typically between the ages of 3 and 5 years.

Random In Nature

Events or processes that occur without a predictable pattern, often described by probability distributions.

Memory Skills

The ability to encode, store, and retrieve information over time.