Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 34 - Part XII - The Influence of Monetary and Fiscal Policy on Aggregate Demand - Quick Check Multiple Choice - Page 767: 5

Answer

c) smaller, but still positive

Work Step by Step

The higher interest rate will decrease the marginal propensity to consume. Thus, the marginal propensity to consume falls, and the overall increase from the government spending decreases (but is still positive).
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