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Today, 07:52

suppose that there are no crowding out effects and the mpc is. 9. by how much must the government increase expenditures to shift the aggregate demand curve right by $10 billion

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  1. Today, 09:08
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    Answer: The answer is $ 1 billion.

    Explanation:

    MPC stands for the marginal propensity to consume.

    If MPC is 9 it implies that the multiplier is 10 i. e 1 / (1-0.9). The rise in aggregate demand is equal to multiplier times change in government expenditures so to boost aggregate demand by 10 billion dollar government has to increase expenditure by Dollar 1 billion.
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