Assume the Following. • the MPC Has a Value of 0.8

question 458

Multiple Choice

Assume the following.
• The MPC has a value of 0.8.
• The relationship between the interest rate, r, and investment, I, is given by the equation,
I = 20,000 - br,
Where b is a positive constant.
• Government purchases, G, are increased by $1,000.
In which of the following cases would there be no crowding out?

• A) b = 0
• B) b = 0.2
• C) b = 0.8
• D) b = 1

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