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

question 140

Multiple Choice

If the crowding-out effect is complete and the marginal propensity to save is 0.1, then an increase in government spending of $400 billion will generate how much more real GDP?

• A) $0
• B) $40 billion
• C) $100 billion
• D) $400 billion

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Definitions:

AC Generator

An alternator in a vehicle that converts mechanical energy into alternating current electricity to power electrical systems.

Diodes

Semiconductor devices that allow current to flow in one direction, often used in electronics to rectify, switch, or modulate signals.

Direct Current

An electric current that flows in one direction only, used in many electronic devices and battery-powered systems.

Alternating Current

Electrical current that periodically reverses direction, commonly used in households and industries for power distribution.