Suppose the government spend $10 billion on a public works program in order to stimulate aggregate...
Suppose the government spend $10 billion on a public works program in order to stimulate aggregate demand. If the crowding out effect exceed the multiplier effect, will the aggregate demand curve shift to the right by more or less than 10 billion?
Homework Answers
If the crowding out effect exceed the multiplier effect, aggregate demand curve shift to the right by less than 10 billion.
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Suppose the government spend $10 billion on a public
works program in order to stimulate aggregate...
Suppose economists observe that an increase in government spending of $5 billion raises the real aggregate...
Suppose economists observe that an increase in government spending of $5 billion raises the real aggregate output level by $20 billion. (a) In the absence of the crowding out effect, what would the numerical value of marginal 1. propensity to consume (MPC)? (b) Now suppose the crowding-out effect also comes to play.Should the new numerical value of marginal propensity to consume (MPC) be larger or smaller than that of your answer in part (a)? Explain. (Hint: the multiplier effect and...
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For the following problems, use the information provided to determine which direction the AD will shift...
For the following problems, use the information provided to determine which direction the AD will shift and by how much the AD curve will shift. 7. Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to the 8. Assume the multiplier is 5 and that the crowding-out effect is $20 billion. An increase in government purchases of $10 billion will shift the aggregate-demand curve...
Is the right answer b? thank you Assume the multiplier is 5 and that the crowding-out...
Is the right answer b? thank you
Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the A. right by $130 billion. B. right by $70 billion. C. right by $50 billion. CD.right by $10 billion.
3b. Evaluate/Interpret the followings: (10 marks) (0) The Federal government (central bank) can shift the aggregate...
3b. Evaluate/Interpret the followings: (10 marks) (0) The Federal government (central bank) can shift the aggregate demand curve, what will happen to te demand and demand curve shift, if interest rate decrease and if interest rate increase.( support with diagram) (2 marks) (i) Compare "The multiplier effect" and the "crowding-out effeet" (2 marks) (ii) Compare "The misery index" and "Phillips curve" (2 marks)
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5. Suppose the government borrows $20 billion less next year than this year. a. Use a...
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If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in...
If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more than indicated by the government spending multiplier. True False
Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30.
3. The multiplier effect of a change in government purchases Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is _______ , and the spending multiplier for this economy is _______ . Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government purchases will lead to a decrease in income, generating an initial change...
In order to financially stimulate the nation, the Federal government injected $900 billion dollars into the...
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Suppose economists observe that an increase in government spending of $5 billion raises the real aggregate output level by $20 billion. (a) In the absence of the crowding out effect, what would the numerical value of marginal 1. propensity to consume (MPC)? (b) Now suppose the crowding-out effect also comes to play.Should the new numerical value of marginal propensity to consume (MPC) be larger or smaller than that of your answer in part (a)? Explain. (Hint: the multiplier effect and...
For the following problems, use the information provided to determine which direction the AD will shift and by how much the AD curve will shift. 7. Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to the 8. Assume the multiplier is 5 and that the crowding-out effect is $20 billion. An increase in government purchases of $10 billion will shift the aggregate-demand curve...
Is the right answer b? thank you
Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the A. right by $130 billion. B. right by $70 billion. C. right by $50 billion. CD.right by $10 billion.
3b. Evaluate/Interpret the followings: (10 marks) (0) The Federal government (central bank) can shift the aggregate demand curve, what will happen to te demand and demand curve shift, if interest rate decrease and if interest rate increase.( support with diagram) (2 marks) (i) Compare "The multiplier effect" and the "crowding-out effeet" (2 marks) (ii) Compare "The misery index" and "Phillips curve" (2 marks)
5. Suppose the government borrows $20 billion less next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of less government borrowing. c. Will this cause crowding - out or crowding - in effect? Please explain.
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