Multiple Choice
Assume that there is no accelerator affect.The MPC = 3/4.The government increases both expenditures and taxes by $600.The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone.The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand.How much does aggregate demand shift by?
A) $1480
B) $480
C) $160
D) None of the above is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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