Question

Suppose a president of a country uses $450 million to build public schools. The expenditure is entirely financed by borrowing. The government did not borrow any money before building the public schools. Before the government borrowing, the equilibrium amount of savings = $800 million. After the government borrowing, the equilibrium amount of savings = $950 million. Use the given information to answer questions 21 - 26.
Assume complete crowding out, how much is the decrease in household consumptions after the government borrowing?

Answer 1

950 million dollars every year