Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Question

Question

Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Suppose that the government increases its expenditure on goods and services by $100billion and pays for these goods and services by raising autonomous taxes by $100billion. What is the effect on aggregate demand and real GDP of each change individually and of the two combined?

business economics

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

When only government expenditure increases, then AD and Real GDP both increases by more than 100billion

Increase in tax by $100 billion will reduce GDP by more than $100

when both things happened combinedly then aggregate demand or GDP increases exactly by 100 billion because balance budget multiplier=1

Add a comment

Answer 2

Similar Homework Help Questions

The government expenditure multiplier is the effect of a change in government expenditure on goods and...

The government expenditure multiplier is the effect of a change in government expenditure on goods and services on _____. a) Aggregate demand b) Real GDP c) Consumption d) Aggregate supply
What is the eventual effect on real GDP if the government increases its purchases of goods...

What is the eventual effect on real GDP if the government increases its purchases of goods and services by $60,000? Assume the marginal propensity to consume ( MPC) is 0.75. What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $60,000? Assume the MPC has not changed. An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in O a...
Explain the change in aggregate demand when: (6 pts) Government expenditure on goods and services increases...

Explain the change in aggregate demand when: (6 pts) Government expenditure on goods and services increases by $100 Billion (7 pts) Taxes are increased by $100 Billion (7 pts) Both 1 and 2 occur simultaneously

Explain the change in aggregate demand when: a. Government expenditure on goods and services increases by...

Explain the change in aggregate demand when: a. Government expenditure on goods and services increases by $100 Billion b.Taxes are increased by $100 Billion c. Both 1 and 2 occur simultaneously
Explain the change in aggregate demand when: 1. (6 pts) Government expenditure on goods and services...

Explain the change in aggregate demand when: 1. (6 pts) Government expenditure on goods and services increases by $100 Billion 2. (7 pts) Taxes are increased by $100 Billion 3. (7 pts) Both 1 and 2 occur simultaneously
Suppose government spending decreases. Beginning in a long-run equilibrium, what would be the long-run effect on...

Suppose government spending decreases. Beginning in a long-run equilibrium, what would be the long-run effect on the goods and services market? Group of answer choices A. GDP Deflator increases, Real GDP decreases B. GDP Deflator decreases, Real GDP decreases C. GDP Deflator decreases, no change in Real GDP D. GDP Deflator increases, no change in Real GDP An increase in the amount of technology will shift which curve(s)? Group of answer choices A. Aggregate demand and short-run aggregate supply B....

The table shows real? GDP, Y?, consumption? expenditure, C?, ?investment, I?, government expenditure on goods and?...

The table shows real? GDP, Y?, consumption? expenditure, C?, ?investment, I?, government expenditure on goods and? services, G?, ?exports, X?, ?imports, M?, and aggregate planned? expenditure, and AE?, in millions of dollars. Taxes are constant. If investment crashes to? $0.55 trillion but nothing else? changes, what is equilibrium expenditure and what is the? multiplier? Homework: Chapter 14 Save Score: 0 of 1 pt 17 of 25 (19 complete) HW Score: 76%, 19 of 25 pts Chapter Problem5 Question Help *...
Aggregate expenditure is the total amount of spending in the economy that determines the level of...

Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP. Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the...
Derive the aggregate expenditure function, and calculate the equilibrium real GDP.. Determine the expenditure multiplier using aggregate expenditure function slop value... What is the expenditure multiplier? ... Everything else the same, by how much do

Question#1A The following are details of the expenditure of a very small economy. All the autonomous expenditures are given in $ thousand. C = 200 + 0.8Yd I = 10 G = 50 T = 0.05Y X = 40 M = 0.1Y  Derive the aggregate expenditure function, and calculate the equilibrium real GDP  Determine the expenditure multiplier using aggregate expenditure function slope value Question#1B Suppose the slope of the AE curve is 0.80. i) What is the expenditure multiplier? ii) Everything else the same, by how much does equilibrium aggregate expenditure...

Aggregate expenditure is the total amount of spending in the economy that determines the level of...

Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP. Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the...

Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Homework Answers

Add Answer to:
Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Post as a guest

Earn Coins

The government expenditure multiplier is the effect of a change in government expenditure on goods and...

What is the eventual effect on real GDP if the government increases its purchases of goods...

Explain the change in aggregate demand when: (6 pts) Government expenditure on goods and services increases...

Explain the change in aggregate demand when: a. Government expenditure on goods and services increases by...

Explain the change in aggregate demand when: 1. (6 pts) Government expenditure on goods and services...

Suppose government spending decreases. Beginning in a long-run equilibrium, what would be the long-run effect on...

The table shows real? GDP, Y?, consumption? expenditure, C?, ?investment, I?, government expenditure on goods and?...

Aggregate expenditure is the total amount of spending in the economy that determines the level of...

Derive the aggregate expenditure function, and calculate the equilibrium real GDP.. Determine the expenditure multiplier using aggregate expenditure function slop value... What is the expenditure multiplier? ... Everything else the same, by how much do

Aggregate expenditure is the total amount of spending in the economy that determines the level of...

Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Homework Answers

Add Answer to: Suppose that the government increases its expenditure on goods and services by $100billion and pays for...

Post as a guest

Earn Coins

Add Answer to:
Suppose that the government increases its expenditure on goods and services by $100billion and pays for...