10. Crowding out effect

Suppose economists observe that an increase in government spending of $9 billion raises the total demand for goods and services by $45 billion.

If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be__(4/5, 5, 1/5).

Now suppose the economists allow for crowding out.

Their new estimate of the MPC would be___(larger, smaller) than their initial one.