Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In...
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession.
Instructions: In part a, round your answers to 2 decimal places. Enter positive numbers. In part b, enter your answers as whole numbers.
a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $50 billion? $________ billion.
How large a tax cut would be needed to achieve the same increase in aggregate demand? $________ billion.
b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (because it maintains a balanced budget, G=T).
Increase spending by $_______ billion.
Increase taxes by $________ billion.
Homework Answers
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Assume that a hypothetical economy with an MPC of 0.8 is
experiencing severe recession.
Instructions: In...
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In...
Assume that a hypothetical economy with an MPC of 0.8 is
experiencing severe recession.
Instructions: In part a, round your answers to 2 decimal
places. Enter your answers as positive numbers. In part b, enter
your answers as whole numbers.
a. By how much would government spending have to rise to shift
the aggregate demand curve rightward by $50 billion?
___billion
How large a tax cut would be needed to achieve the same
increase in aggregate demand?
___billion
b. Determine...
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. a. By...
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Instructions: Round your answer to 2 decimal places and enter your answer as a positive number. Tax cut - ARRASANTA billion. b. Determine one possible combination of government spending...
Assume that a hypothetical economy with an MPC of.8is experiencing severe recession. a) By how much...
Assume that a hypothetical economy with an MPC of.8is experiencing severe recession. a) By how much would government spending have to increase to shift the aggregate demand curve rightward by $50 billion (nominal terms)? Ans: Show work: b) How large a tax cut would be needed to achieve this same increase in aggregate demand (nominal terms)? Ans: Show work: c) Why the difference in a) and b) above? (One sentence)
1) Suppose that the national economy is experiencing a recession with an estimated recessionary gap of...
1) Suppose that the national economy is experiencing a recession with an estimated recessionary gap of $10 billion. Congress is considering the use of fiscal policy to ease the recession, and due to current political sentiments, it has determined that the maximum spending increase the government is willing to support is $3 billion. The government wants to make up the remainder of the recessionary gap using tax cuts. If a spending increase of $3 billion is approved and the MPC...
When an economy is experiencing a recession and the MPC = 4/5, a $5 billion dollar increase in government spending will cause output to increase by
1. When an economy is experiencing a recession and the MPC = 4/5, a $5 billion dollar increase in government spending will cause output to increase by $20 billion $400 million $25 billion $160 million2. Which of the following is the most frequently used monetary policy tool of the Federal Reserve to change the money supply? the discount rate open market operations changing tax rates the required reserve ratio3. During the 2008-2009 recession, the Federal Reserve provided additional liquidity into the financial system. This ultimately reduced the federal funds rate, which...
30-33 30) An appropriate fiscal policy for a severe recession is B) a decrease in tax...
30-33
30) An appropriate fiscal policy for a severe recession is B) a decrease in tax rates. D) a decrease in government spending. A) appreciation of the dollar. C) an increase in interest rates. 31) A contractionary fiscal policy is shown as a A) rightward shift in the economy's aggregate demand curve. B) rightward shift in the economy's aggregate supply curve C) leftward shift in the economy's aggregate demand curve. D) movement along an existing aggregate demand curve. 32) A...
2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c) Decrease,...
2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c) Decrease, increases d Increase, decreases which the recessionary gap 3) Suppose that the MPC is .75 and the U.S Federal Government reduces taxes by 10 million dollars. After 3 rounds of the multiplier process RGDP will change by a) 4.23 million b) 17.34 million c) 23.13 million dollars. d) 30 million 4) "George W. Bush's $152 billion tax rebate plan of 2008 was designed to...
The graph below depicts an economy where a decline in aggregate demand has caused a recession....
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to increase to restore the economy to its long-run equilibrium? O...
Multiple Choice: 1) Assume the MPC is 0.75 and lump sum taxes are collected by the government. What is the governm...
Multiple Choice: 1) Assume the MPC is 0.75 and lump sum taxes are collected by the government. What is the government tax multiplier? A)-1.33 B) - 25 C) - 75 D) -4 E) -3 , which the recessionary gap. 2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c Decrease, increases d) Increase, decreases 3) Suppose that the MPC is.75 and the US Federal Government reduces taxes by 10 million dollars. After 3 rounds of...
The graph below depicts an economy where a decline in aggregate demand has caused a recession
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession.Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? b. If the MPC...
Assume that a hypothetical economy with an MPC of 0.8 is
experiencing severe recession.
Instructions: In part a, round your answers to 2 decimal
places. Enter your answers as positive numbers. In part b, enter
your answers as whole numbers.
a. By how much would government spending have to rise to shift
the aggregate demand curve rightward by $50 billion?
___billion
How large a tax cut would be needed to achieve the same
increase in aggregate demand?
___billion
b. Determine...
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Instructions: Round your answer to 2 decimal places and enter your answer as a positive number. Tax cut - ARRASANTA billion. b. Determine one possible combination of government spending...
Assume that a hypothetical economy with an MPC of.8is experiencing severe recession. a) By how much would government spending have to increase to shift the aggregate demand curve rightward by $50 billion (nominal terms)? Ans: Show work: b) How large a tax cut would be needed to achieve this same increase in aggregate demand (nominal terms)? Ans: Show work: c) Why the difference in a) and b) above? (One sentence)
30-33
30) An appropriate fiscal policy for a severe recession is B) a decrease in tax rates. D) a decrease in government spending. A) appreciation of the dollar. C) an increase in interest rates. 31) A contractionary fiscal policy is shown as a A) rightward shift in the economy's aggregate demand curve. B) rightward shift in the economy's aggregate supply curve C) leftward shift in the economy's aggregate demand curve. D) movement along an existing aggregate demand curve. 32) A...
2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c) Decrease, increases d Increase, decreases which the recessionary gap 3) Suppose that the MPC is .75 and the U.S Federal Government reduces taxes by 10 million dollars. After 3 rounds of the multiplier process RGDP will change by a) 4.23 million b) 17.34 million c) 23.13 million dollars. d) 30 million 4) "George W. Bush's $152 billion tax rebate plan of 2008 was designed to...
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy LRAS Price Level 100 200 300 400 500 600 700 800 900 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to increase to restore the economy to its long-run equilibrium? O...
Multiple Choice: 1) Assume the MPC is 0.75 and lump sum taxes are collected by the government. What is the government tax multiplier? A)-1.33 B) - 25 C) - 75 D) -4 E) -3 , which the recessionary gap. 2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c Decrease, increases d) Increase, decreases 3) Suppose that the MPC is.75 and the US Federal Government reduces taxes by 10 million dollars. After 3 rounds of...
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