In a Neoclassical Economy, If Consumption Increases as the Interest

question 113

Multiple Choice

In a neoclassical economy, if consumption increases as the interest rate decreases, then a $10 billion rise in government spending would:

• A) still crowd out exactly $10 billion of investment.
• B) crowd out between zero and $10 billion of investment.
• C) not crowd out any investment.
• D) crowd out more than $10 billion of investment.

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