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In a neoclassical economy, assume that the government lowers both government spending and taxes by $100 billion. If the marginal propensity to consume is 0.6, investment will: Group of answer choices rise
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13 votes
In a neoclassical economy, assume that the government lowers both government spending and taxes by $100 billion. If the marginal propensity to consume is 0.6, investment will: Group of answer choices rise by $100 billion. not change. rise by $40 billion. rise by $60 billion.

User Yzorg
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1 Answer

17 votes
17 votes

Answer:

rise by $40 billion

Step-by-step explanation:

Calculation to determine what the investment will be

Investment=$100 billion*(100%-60%)

=$100 billion*40%

=$40 billion

Therefore the investment will rise by $40 billion

User That Other Guy
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