1-Assume that an economy with an MPC of .98 and marginal propensity to import of .1...
1-Assume that an economy with an MPC of .98 and marginal propensity to import of .1 experiences an inflationary gap and net export is $500 billion. In what direction, and by what amount, will consumption change?
2-If the government decides to use monetary policy to close the gap, what type of monetary policy would you recommend? Be very specific.
3-Explain how your recommendation will affect the equilibrium level of GDP. Illustrate your answer with a graph.
PLEASE ANSWER 3 OF THE QUESTIONS. thank you
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1-Assume that an economy with an MPC of .98 and marginal
propensity to import of .1...
Assume that the economy is$500 billion above its full-employment GDP and the marginal propensity to consume...
Assume that the economy is$500 billion above its full-employment GDP and the marginal propensity to consume is 0.75 Give a fiscal policy recommendation to close the gap in GDP. How much is needed? Note: This will depend on what fiscal policy tool you recommend in a) Show your calculations to receive full points. (you can assume AD shortfall = GDP gap) How would this policy change affect the economy's budget position?
1. Explain the effects of the following actions on equilibrium income (Assume that the marginal propensity...
1. Explain the effects of the following actions on equilibrium income (Assume that the marginal propensity to consume is 0.8). a. Government purchases rise by $10 billion. b. Taxes fall by $10 billion. Explain how fiscal policy can be used to close the (a) contractionary gap and (b) inflationary gap.
Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below...
Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below full-employment real GDP. To achieve full employment, aggregate demand (AD) must be increased $2 trillion. Following discretionary fiscal policy, government spending should be increased:
Consumption expenditure = $262,619.0 million Planned investment = $86,227.0 million Government expenditure = $113,601.0 million Export...
Consumption expenditure = $262,619.0 million Planned investment = $86,227.0 million Government expenditure = $113,601.0 million Export expenditure = $99,804.0 million Import expenditure = $97,424.0 million Autonomous taxes = $56,700.0 million Income tax rate = 28% Marginal propensity to save = 0.4 Marginal propensity to import = 0.1 Part (10) Illustrate the GDP gap using the AD-AS Model and the AE Model, if the natural level of income is estimated as $490,000 million. Part (11) If the government wants to close...
3. You are given the following information about the economy: autonomous consumption = $300 billion ...
3. You are given the following information about the economy: autonomous consumption = $300 billion planned investment = $300 billion government spending = $500 billion mpc = .8 imports = $200 billion exports = $500 billion a. Using the values above, what is the equation for the consumption function? b. Using the values above, what is the income/spending multiplier? c. What is the value of Net Exports? d. Is there a trade surplus or deficit? Of how much?...
1. Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity...
1. Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.7 a. Government purchases rise by $60 billion. b. Taxes fall by $60 billion. 2. Explain how fiscal policy can be used to close the (a) contractionary gap and (b) inflationary gap.
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity...
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity to import 0 autonomous consumption 4 exports 0 private investment 20 income tax rate 0 government expenditures 0 Income consumption investment government aggregate expenditures expenditures 0 10 20 30 40 50 60 70 80 90 What is equilibrium GDP?
For a real Keynesian model of a mixed economy with a marginal propensity to consume equal...
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5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal...
5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $350 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. Consumption Function CONSUMPTION (Billions of dollars) 0 800...
If the marginal propensity to consume (MPC) equals 0.25 and the government increases spending by $600 billion, the total impact on GDP will be approximately:
5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $350 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. Consumption Function CONSUMPTION (Billions of dollars) 0 800...
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