Which economy would deliver the largest national income bonus for a given discretionary expansion in government spending.Consider the following table which describes four different economies in terms of the behavioural parameters relating to the leakages to aggregate demand.
Assume that in all four economies, there is idle capacity, the central bank holds all interest rates constant, inflation is constant and there is no changes in international competitiveness.
Which economy would deliver the largest national income bonus for a given discretionary expansion in government spending.
Answer: Economy A