Assume that if there was no crowding-out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding-out, then GDP would have:

Question

Quizplus · Accepted Answer

Full crowding-out implies that the increase in government spending is completely offset by a decrease in private spending, resulting in no net change in GDP.

Assume That If There Was No Crowding-Out, an Increase in Government