Say the MPC is .6 and suppose taxes are cut by $300 billion and government spending...
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the MPC is .6 and suppose taxes are cut by $300 billion and
government spending...
1. Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government...
1. Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government aims to increase GDP by $250 billion. a) Calculate the fiscal multiplier b) how much the government needs to increase spending to increase GDP by $250 billion c) Calculate the tax cut multiplier, d) How much the government needs to cut taxes to increase GDP by $250 billion? e) Explain why the tax multiplier is smaller than the fiscal multiplier. f) If you were...
14. (2 pt) Explain the effect of a discretionary cut in taxes of $40 billion on...
14. (2 pt) Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's MPC is .75. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion? A tax cut of $40 billion will result in initial increase in consumption of S billion). (Note that $10Bil. is saved based on marginal propensity to save (MPS), that is 25 (because 1-MPC-MPS). Then .25 x $40-$10 billion). This...
#6 Consider an economy that is operating at the full-employment level of real GDP with MPC=0.7...
#6 Consider an economy that is operating at the full-employment level of real GDP with MPC=0.7 MPC=0.7 . The short-run effect on equilibrium real GDP of a $50 billion increase in government spending ( G G ), balanced by a $50 billion increase in taxes, is...…………. abillion (Increase or Decrease) in real GDP. #7 Suppose that the MPC in a country is 0.9. Complete the following table by calculating the change in GDP predicted by the multiplier process given each...
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)?
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...
Investment Problem: 1. Assume the MPC is 3/4, if investment spending increase by $50 billion, the...
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...
2. If the MPC were 0.9 and government increased spending by $100 billion. (a) How much...
2. If the MPC were 0.9 and government increased spending by $100 billion. (a) How much spending would occur in the third cycle of the figure below? (b) How many spending rounds would occur before consumer spending increased by $300 billion? The third cycle there would be 81 billion of
Consider an economy in which taxes, planned investment, government spending on goods and services, and net...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 10r; c = 0.6; Ta = 1,800; Ip = 2,400 – 50r; G = 2,000; NX = -200 (a)Derive Ep and...
QUESTION 21 Suppose investment spending initially increases by $50 billion in an economy whose MPC is...
QUESTION 21 Suppose investment spending initially increases by $50 billion in an economy whose MPC is 2/3. By how much will this ultimately change real GDP? O A $75 billion OB. $50 billion OC $ 150 billion D. $ 200 billion QUESTION 22 Which of the following statements is FALSE? O A When income increases MPS is constant When income increases APS Increases C. When income increases MPC is increases D. When income increases APC decreases QUESTION 23 If the...
2. If the MPC were o.9 and government increased spending by $100 billion. (a) How much...
2. If the MPC were o.9 and government increased spending by $100 billion. (a) How much spending would occur in the third cycle of the figure below? (b) How many spending rounds would occur before consumer spending increased by $300 billion? The third cvcle there would bdBI billion of
14. (2 pt) Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's MPC is .75. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion? A tax cut of $40 billion will result in initial increase in consumption of S billion). (Note that $10Bil. is saved based on marginal propensity to save (MPS), that is 25 (because 1-MPC-MPS). Then .25 x $40-$10 billion). This...
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...
2. If the MPC were 0.9 and government increased spending by $100 billion. (a) How much spending would occur in the third cycle of the figure below? (b) How many spending rounds would occur before consumer spending increased by $300 billion? The third cycle there would be 81 billion of
QUESTION 21 Suppose investment spending initially increases by $50 billion in an economy whose MPC is 2/3. By how much will this ultimately change real GDP? O A $75 billion OB. $50 billion OC $ 150 billion D. $ 200 billion QUESTION 22 Which of the following statements is FALSE? O A When income increases MPS is constant When income increases APS Increases C. When income increases MPC is increases D. When income increases APC decreases QUESTION 23 If the...
2. If the MPC were o.9 and government increased spending by $100 billion. (a) How much spending would occur in the third cycle of the figure below? (b) How many spending rounds would occur before consumer spending increased by $300 billion? The third cvcle there would bdBI billion of
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