The multiplier effect of fiscal policy predicts that an increase in government spending of $150 billion will increase total income by $750.00 billion if the marginal propensity to consume is 0.80.
If we account for crowding-out, then the increase in aggregate demand will be:
A. more than $750.00 billion.
B. less than $750.00 billion.
C. exactly $750.00 billion.
D. none of these
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