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 spending by $50, what is the impact on AD? Assume the government decreases taxes by $50, what is the impact on AD?
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What is the formula for the government spending multiplier? Tax
Multiplier? Calculate both multipliers assuming an...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal policy b. Assume C=$12,300 +.6 Dl and graph an economy in the AD AS model with Potential Output of $600 and Real GDP at $450. Identify typical levels of unemployment and inventory change in this gap. c. Calculate the change in unemployment insurance needed to close the gap. Show all work d. Assume government spending changes by $50, what is the impact on AD?
4a. The government of Peru is facing an inflationary gap. Presume they plan a tax increase...
4a. The government of Peru is facing an inflationary gap. Presume they plan a tax increase of $35 billion and spending decreases of $15 Billion. The MPC for the country is 0.55. We are curious what the fiscal impact will be from the policy. What would be the total decrease in GDP based on the fiscal multiplier using the data above? 4b. Let's use a more realistie multiplier - Let's add some realism to the exercise and include the effects...
1. Suppose in a simple closed economy with MPC = 0.75, the planned investment spending nas...
1. Suppose in a simple closed economy with MPC = 0.75, the planned investment spending nas suddenly fallen, reducing AD and output to a level that below the natural level of output by 100 Million. Assume that the real interest rate is constant so that there is no crowding out of (gross) investment. (a) If the government decided to try to get the output back to the natural level of output using only a change in government spending (AG), by...
3. In early 2009, economists estimated a spending multiplier m- 1.5, and they also concluded that GDP had fell 2.1 trillion dollars below the "full employment GDP". The new government the...
3. In early 2009, economists estimated a spending multiplier m- 1.5, and they also concluded that GDP had fell 2.1 trillion dollars below the "full employment GDP". The new government then managed to pass through Congress a fiscal stimulus package amounting to about 0.75 trillion dollars of new spending composed of new government purchases and tax cuts in approximately equal parts. Would you expect this new spending to be sufficient to bridge the gap between actual and potential GDP? (In...
Given the b=mpc=.8, and Yf-Ye=400, how much government spending is necessary to close the recessionary gap,...
Given the b=mpc=.8, and Yf-Ye=400, how much government spending is necessary to close the recessionary gap, and how much tax cut is necessary to get to full employment? In a depressed economy with a lot of excess capacity and a MPC of 0.9, what effect will a $400 increase in government spending have on equilibrium GDP? Given, C = 200 + .8Yd , I =300, t =0.25, G = 400, solve the following questions. What is the multiplier with tax?...
B,c,d,e please solve Suppose in the economy autonomous consumption - $100, autonomous investmen $120, government purchases...
B,c,d,e please solve
Suppose in the economy autonomous consumption - $100, autonomous investmen $120, government purchases G-$400 lump-sum taxes = $70, transfers Tr-$20, exports Er $150 autonomous imports im = $30, marginal propensity to consume mpc = 0.8, proportional income tax rate 1-20%, marginal propensity to invest mpi-0.1, and marginal propensity to imports mpm-0.4 (a) For this economy calculate (i) the amount of autonomous spending: (ii) the value of the spending multiplier; (iii) the equilibrium level of output; (iv) the...
The graph shows an economy that is above full employment. To restore full employment, the government...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
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)?
Refer to the accompanying table in answering the questions that follow: Aggregate Expenditures (Catlg+Xn+G), Billions 420...
Refer to the accompanying table in answering the questions that follow: Aggregate Expenditures (Catlg+Xn+G), Billions 420 Real Domestic Output, Possible Levels of Employment, Millions 70 90 110 130 150 Billions 400 450 460 500 540 580 600 a. If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in...
3.The Multiplier and returning the economy to Equilibrium a. List expansionary and contractionary tools of fiscal policy b. Assume C=$12,300 +.6 Dl and graph an economy in the AD AS model with Potential Output of $600 and Real GDP at $450. Identify typical levels of unemployment and inventory change in this gap. c. Calculate the change in unemployment insurance needed to close the gap. Show all work d. Assume government spending changes by $50, what is the impact on AD?
4a. The government of Peru is facing an inflationary gap. Presume they plan a tax increase of $35 billion and spending decreases of $15 Billion. The MPC for the country is 0.55. We are curious what the fiscal impact will be from the policy. What would be the total decrease in GDP based on the fiscal multiplier using the data above? 4b. Let's use a more realistie multiplier - Let's add some realism to the exercise and include the effects...
1. Suppose in a simple closed economy with MPC = 0.75, the planned investment spending nas suddenly fallen, reducing AD and output to a level that below the natural level of output by 100 Million. Assume that the real interest rate is constant so that there is no crowding out of (gross) investment. (a) If the government decided to try to get the output back to the natural level of output using only a change in government spending (AG), by...
3. In early 2009, economists estimated a spending multiplier m- 1.5, and they also concluded that GDP had fell 2.1 trillion dollars below the "full employment GDP". The new government then managed to pass through Congress a fiscal stimulus package amounting to about 0.75 trillion dollars of new spending composed of new government purchases and tax cuts in approximately equal parts. Would you expect this new spending to be sufficient to bridge the gap between actual and potential GDP? (In...
B,c,d,e please solve
Suppose in the economy autonomous consumption - $100, autonomous investmen $120, government purchases G-$400 lump-sum taxes = $70, transfers Tr-$20, exports Er $150 autonomous imports im = $30, marginal propensity to consume mpc = 0.8, proportional income tax rate 1-20%, marginal propensity to invest mpi-0.1, and marginal propensity to imports mpm-0.4 (a) For this economy calculate (i) the amount of autonomous spending: (ii) the value of the spending multiplier; (iii) the equilibrium level of output; (iv) the...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
Refer to the accompanying table in answering the questions that follow: Aggregate Expenditures (Catlg+Xn+G), Billions 420 Real Domestic Output, Possible Levels of Employment, Millions 70 90 110 130 150 Billions 400 450 460 500 540 580 600 a. If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in...
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