Assume the Following

Multiple Choice

Assume the following. • The MPC has a value of 0.8.
• The relationship between the interest rate, r, and investment, I, is given by the equation, , where b is a positive constant.
• Government purchases, G, are increased by $1,000.
In which of the following cases would there be no crowding out?

A) b=0
B) b=0.2
C) b=0.8
D) b= 1