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11 January, 23:48

f the crowding-out effect is complete, then an increase in government spending of $100 billion will generate how much more real national income? (Assume a marginal propensity to save of. 25.)

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  1. 12 January, 02:00
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    An increase in gevernment spending of $100 billion will generate $400 billion more real national income.

    Explanation:

    the multiplier = 1 / (marginal propensity) = 1 / (0.25) = 4

    increase in real national income = $100 billion*4

    = $400 billion

    Therefore, An increase in gevernment spending of $100 billion will generate $400 billion more real national income.
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