ECON 1BB3 Lecture Notes - Money Supply
adrianagreen0110 and 39672 others unlocked
11
ECON 1BB3 Full Course Notes
Verified Note
11 documents
Document Summary
If there is crowding out, then the multiplier would be larger than 3, so the. Mpc would be larger than the answer in part (a). Consumption would increase by 3/4 of billion, or billion (ad shifts out by billion). There is a multiplier effect here - the ad curve will shift out by billion * multiplier (which is 4) - ad shifts out by . If the government had increased spending by billion, the outward ad shift would be billion - this is because only part of a tax cut is spent, the rest is saved. If g increases, the ad curve shifts out to the right. As money demand increases due to higher income levels, the interest rate rises and there is crowding out (the. Ad curve shifts back to the left a bit).