Question

s Question Completion Status QUESTION 3 r the marginal propensity to consume is Q.70, then if income rises by $4,000, consumption will increase by $4,000 O $3,000 O$2.800 O $1.333 QUESTION The table shows the aggregate demand and aggregate supply schedules for Japan, The Potential GPD is 600 trillion yen. e Level Real GDP Demanded I GDP Supplied Deflator) Kin trillions of 2005 yen) in trillions of 2005 yer) 75 600 550 500 400 450 500 105 115 A. What is the short run macroeconomic equilbrium? B Does Japan have an inflationary gap or a recessionary gap? C. what is the magntude of the gap? D. if the MPS 2, how much could the government increase or decrease taxes to close the gap? trilion yen Eap trillion yen trilion yen. taxes by The government could Cick Save and Submit to save and subralt, Cick Save All Ansuvers to sove all ansves 名0

Answer 1

3) ans is C

mpc=change in consumption/change in income

thus change in consumption=mpc*change in income=0.7(4000)=2800

4) A) Equilibrium is achieved where quantity demand=quantity supplied

Thus Equilibrium quantity=500

b) since potential GDP is greater than actual equilibrium GDP which means there is recessionary gap

c)recessionary  gap of 600-500=$100 trillion

D)MPs=0.2 and mpc=0.8 tax multiplier=-mpc/1-mpc=-0.8/1-0.8=-4

Thus Govt. should decreases taxes by 25trillion