21. An economist observes that a $10 billion increase in government spending raises aggregate demand by $30 billion. Initially, the economist ignores the crowdingout effect and estimates the marginal propensity to consume (MPC) as 2/3. After taking crowding out into account, the recalculated MPC will be (A) Larger. (B) Smaller. (C) The same. (D) Cannot be determined.

1. Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do? (A) He should sell the car now for $3800. (B) He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200. (C) He should complete the additional work and sell the car for $6200. (D) It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

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