The OECD estimates that the multiplier of government investment in infrastructure can be between 0.9 and 1.3. Based on t

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899604
Joined: Mon Aug 02, 2021 8:13 am

The OECD estimates that the multiplier of government investment in infrastructure can be between 0.9 and 1.3. Based on t

Post by answerhappygod »

The OECD estimates that the multiplier of government investment
in infrastructure can be between 0.9 and 1.3. Based on this
information, if the economy is at full employment and the
government spends $10 million on building new infrastructure to
help the economy, in the long-run:
GDP must decrease because of the crowding-out effect.
we cannot say for sure how much GDP will increase because we do
not know the relative sizes of the crowding-in and crowding-out
effects.
GDP must increase by less than $10 million because of the
crowding-out effect.
GDP must increase by more than $10 million because of the
crowding-in effect.
GDP must remain unchanged because the crowding-in effect will
just cancel out the crowding-out effect.
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Post Reply