The marginal propensity to consume (MPC) is defined as the fraction of
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extra income that a household consumes rather than saves
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When income is $10,000, consumption spending is $6,500.
For this economy an initial increase of $200 in net exports translates into a(n)
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$800 increase in aggregate demand in the absence of the crowding-out effect.
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Assume the Marginal propensity to consume (MPC) is .625. Assume there is a multiplier effect and that the total crowding-out effect is $12 billion. An increase in government purchases of $30 billion will shift aggregate demand to the
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right by $68 billion
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