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1. As an elected official, you have been informed that real GDP is below its potential level and that an action should be taken to encourage growth and bring the economy back to its long run equilibrium. If the marginal propensity to consume is 0.6 and the amount of new government spending is $150 billion, by how much would the economy be stimulated? (assuming all else equal and no crowding out effect) A) $375 billion B) $600 billion C) $3,000 billion D) -$600 billion

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 1. As an elected official, you have been informed that real GDP is below its potential level and that an action

should be taken to encourage growth and bring the economy back to its long run equilibrium. If the marginal propensity to consume is 0.6 and the amount of new government spending is $150 billion, by how much would the economy be stimulated? (assuming all else equal and no crowding out effect)

 A) $375 billion

 B) $600 billion

 C) $3,000 billion

 D) -$600 billion

 
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