If the government decided to increase its spending (G) on road construction by $100, which of...
If the government decided to increase its spending (G) on road construction by $100, which of the following ways of paying for it would increase GDP by the greatest amount?
a. Selling $100 of bonds to the Federal Reserve (the “Fed”).
b. Selling $100 of bonds to the public.
c. Reducing government spending on education by $100.
d. Increasing taxes by $100.
e. All the above options will increase GDP by the same amount.
Homework Answers
Option C is the correct answer
Reason - the decrese in spending will have a greater effect because of greater value of spending multiplier as compared to tax multiplier hence Option C will show the greatest effect
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If the government decided to increase its spending (G) on road
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Table 3-2 Assets Liabilities Bonds Loans Vault cash Deposits at the Fed $250 Deposits $600 $100 $1,000 $50 18) Refer to Table 3-2. Consider the above simplified balance sheet for a bank. If the required reserve ratio, r, is 5%, what are this bank's required reserves, RR? A) $50. B) $100 C) $150. D) $400. 19) According to the quantity theory of money, if the money supply grows at 20% velocity doesn't change, and real GDP grows at 5%, then...
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_lag. The lag between an increase in government spending and the impact of this increased spending on the economy is called the a. effectiveness b.transmission C. legislative d. data QUESTION 49 Complete crowding out implies that as government increases purchases by $1, a. private spending decreases by $1. b. Real GDP remains unchanged. c. there is an equal offsetting decrease in one or more of the components of private expenditures. d. all of the above e none of the above...
a. Consider the hypothetical loanable funds market. The
government increases its spending (G) by $400 through deficit
financing. What is the effect of this event on household
consumption assuming that disposable income remains unchanged?
It will increase by $100.
It will increase by $200.
It will decrease by $100.
It will decrease by $200.
None of the above.
b. Now, same information like a, (The government increases its
spending (G) by $400 through deficit financing), if the Treasury
Secretary convinces...
QUESTION 12 In the aggregate expenditure model if the government of Pasedonia decides to increase government spending by $ 100 billion and to finance this increase in government spending the government of Pasedonia increases taxes by $ 100 billion what effect will this have on the economy? (assume MPC=0.75) O A GDP stays the same OB GDP increases by $ 100 billion OC. GDP will increase by $ 400 billion D.GDP will decrease QUESTION 13 An example of an automatic...
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help plz
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