Question
Suppose that Congress and the President are considering anincrease in government expenditures of $50 billion. They consultwith two economists: Alan and Robert. Alan believes that
Suppose that Congress and the President are considering anincrease in government expenditures of $50 billion. They consultwith two economists: Alan and Robert. Alan believes that themarginal propensity to consume (MPC) is 0.9 and Robert believesthat it is 0.5 If Alan is correct, then the increase in governmentspending will cause GDP to increase by ____, and if Robert iscorrect, then the government spending increase will cause GDP toincrease by ____ (B)
A. $450 billion, $250 billion
B.$500 billion, $100 billion
C.$250 billion, $150 billion
D.$150 billion, $250 billion
E.$45 billion, $25 billion
The answer is B, please explain why.
Suppose that Congress and the President are considering anincrease in government expenditures of $50 billion. They consultwith two economists: Alan and Robert. Alan believes that themarginal propensity to consume (MPC) is 0.9 and Robert believesthat it is 0.5 If Alan is correct, then the increase in governmentspending will cause GDP to increase by ____, and if Robert iscorrect, then the government spending increase will cause GDP toincrease by ____ (B)
A. $450 billion, $250 billion
B.$500 billion, $100 billion
C.$250 billion, $150 billion
D.$150 billion, $250 billion
E.$45 billion, $25 billion
The answer is B, please explain why.
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