What would economist estimate marginal propensity to consume

Reference no: EM13219159

Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion.

1. If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? Round your answer to the nearest one hundredth.

2. Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than their initial one?

Reference no: EM13219159

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