Question

The 2008 fiscal policy package included roughly $100 billion in tax rebates that were mailed to taxpayers. Assume a marginal

0 0
Add a comment Improve this question Transcribed image text
Answer #1

A. Initially the aggregate demand shifts by $95 billion

Reason- Initial shift = MPC* change in disposable income= 0.95*$100 billion= $95 billion

B. Ultimate shift in Aggregate demand is by $1900 billion.

Reason- multiplier= 1/1-MPC= 1/0.05= 20

Ultimate shift in AD= initial shift in AD* multiplier = $95 billion*20= $1900 billion

If it helps kindly upvote

Add a comment
Know the answer?
Add Answer to:
The 2008 fiscal policy package included roughly $100 billion in tax rebates that were mailed to taxpayers. Assume a mar...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Favorites Tools Help d Sites Web Slice Gallery Question 4 (of 7) 5.00 points The 2008...

    Favorites Tools Help d Sites Web Slice Gallery Question 4 (of 7) 5.00 points The 2008 fiscal policy package included roughly $100 billion in tax rebates that were mailed to taxpayers. Assume a marginal propensity to consume (MPC) of 0.95 a. By how much would aggregate demand shf intaly? billion b. By how much would aggregate demand shift ultimately as a result of these rebates? billion

  • by how much would the 90 billion 2008 tax rebates have shifted AD if the MPC...

    by how much would the 90 billion 2008 tax rebates have shifted AD if the MPC was 0.95?

  • 20) Using fiscal policy to avoid the recession of 2009. GDP in 2009 was roughly $15,000...

    20) Using fiscal policy to avoid the recession of 2009. GDP in 2009 was roughly $15,000 billion. You learned in Chapter 1 that GDP fell approximately 3 percentage points in 2009. A 3% decrease in GDP is $450 billion. If the propensity to consume were 0.7 by how much would government spending have to have increased to prevent a decrease in output? If the propensity to consume were 0.7 by how much would taxes have to have cut to prevent...

  • macroeconomics Fiscal Policy In Class Assignment You are hired by the president who believes that the...

    macroeconomics Fiscal Policy In Class Assignment You are hired by the president who believes that the economy is operating at a level of $3.2 trillion and that the potential output is $3 trillion. You are told that the national marginal propensity to consume (MPC) is 0.8. What type of government intervention might you recommend, if any? Discuss how this fiscal policy can be implemented through a change in government spending (how much should government spending change). Show your answer graphically...

  • QULLIP A government is currently operating with an annual budget deficit of $40 billion. The movernment...

    QULLIP A government is currently operating with an annual budget deficit of $40 billion. The movernment has determined that every $10 billion reduction in the amount of bonds it issues each year would reduce the market interest rate by 0.10 percentage point. Furthermore, it has determined that every 0.10 (one-fenth) percentage point change in the market interest rate generates a change in planned investment expenditures in the opposite direction equal to $4 billion. The marginal propensity to consume is 0.75....

  • 14. (2 pt) Explain the effect of a discretionary cut in taxes of $40 billion on...

    14. (2 pt) Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's MPC is .75. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion? A tax cut of $40 billion will result in initial increase in consumption of S billion). (Note that $10Bil. is saved based on marginal propensity to save (MPS), that is 25 (because 1-MPC-MPS). Then .25 x $40-$10 billion). This...

  • X Text Problem 13-12 Question Help A government is currently operating with an annual budget deficit...

    X Text Problem 13-12 Question Help A government is currently operating with an annual budget deficit of $40 billion. The government has determined that every $10 billion reduction in the amount of bonds it issues each year would reduce the market interest rate by 0.10 percentage point. Furthermore, it has determined that every 0.10 (one fenth) percentage point change in the market interest rate generates a change in planned Investment expenditures in the opposite direction equal to $4 billion. The...

  • Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather...

    Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...

  • Multiple Choice: 1) Assume the MPC is 0.75 and lump sum taxes are collected by the government. What is the governm...

    Multiple Choice: 1) Assume the MPC is 0.75 and lump sum taxes are collected by the government. What is the government tax multiplier? A)-1.33 B) - 25 C) - 75 D) -4 E) -3 , which the recessionary gap. 2) During a Recession, the MPC tends to a) Increase, increases b) Decrease, decreases c Decrease, increases d) Increase, decreases 3) Suppose that the MPC is.75 and the US Federal Government reduces taxes by 10 million dollars. After 3 rounds of...

  • FISCAL POLICY IN THEORY: March, 2020: we are on the verge of Congress and the President...

    FISCAL POLICY IN THEORY: March, 2020: we are on the verge of Congress and the President passing legislation that will empower the federal government to spend an unprecedented amount of EXTRA money not seen since World War 2 ---- in order to address the pandemic but also to help cushion the blow financially of perhaps ten or twenty million Americans --- or more --- losing their jobs, and thus suffering a drop in income. The scale of the 2020 recession...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT