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Suppose economists observe that an increase in government spending of 300 billlion raises the total demand for goods and services to 400 billion. If these
Suppose economists observe that an increase in government spending of 300 billlion raises the total demand for goods and services to 400 billion. If these economists ignore the possibility of crowding out effect, calculate the marginal propensity to consume (MPC)? Now suppose economists allow for crowding out. Would their new estimate of the MPC be smaller or larger than your answer to part a, explain.
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