a)
change in GDP = change in investment *(1/(1-MPC))
= 11billion* (1/(1-0.8)) = $55 billion
b)
change in GDP = change in investment *(1/(1-MPC))
= 11billion* (1/(1-0.5)) = $22 billion
a. By how much will GDP change if firms increase their investment by $11 billion and...
By how much will GDP change if firms increase their investment by $8 billion and the MPC is 0.80? If the MPC is 0.67? LO25.5
Problem 30-10 Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $6 billion in the second round of the process. Instructions: In parts a and b, round your answers to 1 decimal place. In part c, enter your answer as a whole number. a. What is the MPC in this economy? b. What is the size of...
Calculate the resulting change in GDP for each of the following MPCs when the government decreases taxes by $225 billion (change in taxes equals -$225 billion) Instructions: Round your answers to one decimal place. a. The marginal propensity to consume (MPC) = 0.2. The change in GDP is $ O b illion. b. The marginal propensity to consume (MPC) = 0.5. The change in GDP is $ billion. C. The marginal propensity to consume (MPC) = 0.8. The change in...
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? b. If the MPC is 0.6, how much does golemment purchases need to increase to shift aggregate demand by the amount you found in part a?Suppose instead that the MPC is 0.5.c. How much does aggregate demand and government purchases need to increase to restore the economy to its long run equilibrium? Aggregate demand needs to increase by...
If the MPC = 0.8, a permanent increase in planned real investment of $40 billion will increase real GDP by a total of
Investment Problem: 1. Assume the MPC is 3/4, if investment spending increase by $50 billion, the level of GDP will: 2. Assume the MPC is 2/3, if investment spending decreases by $30 billion, the level of GDP will: Export Problem: 3. If the multiplier in an economy is 4, a $50 billion increase in exports will: 4. If the multiplier in an economy is 3,a $30 billion decrease in exports will: Balanced Budget Problem: 5. If the MPC is .75...
decrease in personal taxes from $100 billion to 580 billion will increase real GDP 11. If the MPC -0.75, a decrease in person by A) $20 billion. B) $40 billion. C) $60 billion. D) $80 billion. Table 10.1 Consumption C - $1.0+ 0.80YD Investment $1.5 Government purchases $2.2 Net exports Taxes Government transfer payments $0 (all values are in billions of dollars) 2, 12. Refer to Table 10.1. Equilibrium real GDP for this economy is equal to A) $5.75 billion....
Instructions: Enter your answers as a whole
number.
a. How much does aggregate demand need to change to restore the
economy to its long-run equilibrium?
$ ___________ billion
b. If the MPC is 0.75, how much does government purchases need
to change to shift aggregate demand by the amount you found in part
a?
$ ___________ billion
Suppose instead that the MPC is 0.8.
c. How much does aggregate demand and government purchases need
to change to restore the economy...
The graph below depicts an economy where a dcline 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 Price Level 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number How much does aggregate demand need to change to restore the economy to il long-run equilibrium billion of...
By how much will GDP change, and will GDP be increasing, or will it be decreasing if: MPS = .1 and ↑ taxes = $11 billion