Homework Answers
A.Spending multiplier (known as fiscal multiplier or simply the multiplier) represents the multiple by which GDP increases or decreases in response to an increase and decrease in government expenditures and investment. It is the reciprocal of the marginal propensity to save (MPS)
B.The tax multiplier represents a measure of the change of the Gross Domestic Product (GDP) in response to a change in government taxes. The TM can be simple or complex, depending on whether the change in taxes has an impact only on consumption or on all the GDP components.
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Trips 2 4. Explain what these terms mean: a. spending multiplier b. taxation multiplier
The spending multiplier, m, is 1/(1 MPC). a) If the MPC is 0.9, what is the...
The spending multiplier, m, is 1/(1 MPC). a) If the MPC is 0.9, what is the spending multiplier? b) Now suppose government spending increases by $90 million. By how much will GDP rise? $million
What is the formula for the government spending multiplier? Tax Multiplier? Calculate both multipliers assuming an...
What is the formula for the government spending multiplier? Tax Multiplier? Calculate both multipliers assuming an MPC of .6 Graph an economy in the AD AS model with Potential Output of $600 and Real GDP at $450. Calculate the output gap and identify it as a recessionary or inflationary gap. How much fiscal stimulus is needed to close the gap? show work and use formulas for government spending multiplier and tax multiplier. Show all work Assume the government increases government...
Explain how the multiplier process works with respect to the proposed infrastructure spending in Australia;
Explain how the multiplier process works with respect to the proposed infrastructure spending in Australia;
Answer the following: a. MPC = .7.What is the government spending multiplier? = 1/1-0.7 = 10/3 =...
Answer the following: a. MPC = .7.What is the government spending multiplier? = 1/1-0.7 = 10/3 = 3.33 b. MPC = .85.What is the tax multiplier? = -(0.85/1-0.85) = -17/3 = -5.67 c. If the government spending multiplier is 5, what is the tax multiplier? d. If the tax multiplier is -3, what is the government spending multiplier? e. If government purchases and taxes are increased by $150 billion simultaneously, what will the effect be on equilibrium output (income)?
a) Explain how automatic stabilizers work, both on the taxation side and on the spending side,...
a) Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy is producing more than potential GDP. b) Do you think the typical time lag for fiscal policy is likely to be longer or shorter than the time lag for monetary policy? Explain your answer c) How would a balanced budget amendment change the...
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases...
(1) Calculate the government spending multiplier if, an increase in government spending by $5 million increases real GDP by $20 million. Group of answer choices 0.20 0.25 2 5 4 (2) A major benefit of automatic stabilizers is that they: Group of answer choices guarantee a balanced budget over the course of the business cycle. have a tendency to reduce the national debt. moderate the effect of fluctuations in the business cycle. require legislative review by Congress before they can...
- Assume that $1200 represents full employment and that the spending multiplier is 4. 'Alr AE,...
- Assume that $1200 represents full employment and that the spending multiplier is 4. 'Alr AE, t(5,49) (Carlanta), (Cathaton), . Ai (COL), - 40 2. AHA AE = As+byd 1,090 1,200, 1:400 NI/GDP" Ye 2 A recessionary gap of $50 billion exists when the conomy produces an income of $1000 billion a. The b. False it should be $ 200 billion 'c False : it should be $300 billion d. Cannot be determined.
Explain what the following terms are, what they mean, and their effect. a) reactivity feedback b)...
Explain what the following terms are, what they mean, and their effect. a) reactivity feedback b) core melt down c) ultimate heat sink d) Doppler coefficient e) decay heat f) LOCA g) radioactivity depletion mechanism
Why is the multiplier for a change in taxes smaller than for a change in spending?...
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
Explain how you would use monetary policy to reduce unemployment. What is the investment multiplier and...
Explain how you would use monetary policy to reduce unemployment. What is the investment multiplier and how does it work on the spending in an economy?
The spending multiplier, m, is 1/(1 MPC). a) If the MPC is 0.9, what is the spending multiplier? b) Now suppose government spending increases by $90 million. By how much will GDP rise? $million
- Assume that $1200 represents full employment and that the spending multiplier is 4. 'Alr AE, t(5,49) (Carlanta), (Cathaton), . Ai (COL), - 40 2. AHA AE = As+byd 1,090 1,200, 1:400 NI/GDP" Ye 2 A recessionary gap of $50 billion exists when the conomy produces an income of $1000 billion a. The b. False it should be $ 200 billion 'c False : it should be $300 billion d. Cannot be determined.
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
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