B. 100
Explanation: Spending multiplier = 1/(1-MPC) = 1/(1-0.8) = 1/0.2 = 5
This means an increase in government expenses by $1 would increase income by $5.
So, in order to increase income by $500, the government spending needs to increase by $500/5 = $100.
Suppose the marginal propensity to consume is 0.8 and the tax rate is 0.25 and all...
Suppose the marginal propensity to consume is 0.8. The government increases government spending and taxes by $10 billion. What happens to aggregate output demanded?
Use the aggregate expenditures model and assume the marginal propensity to consume is 0.90. An increase in government spending of $1 billion would result in an increase in GDP of?
If the marginal propensity to consume (MPC) equals 0.25 and the government increases spending by $600 billion, the total impact on GDP will be approximately:
1.) If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion, equilibrium GDP will increase by____. $350 billion $150 billion $200 billion $266.7 billion $800 billion 2.) AE = 3000 + 0.75*RGDP. Given this equation for AE, find equilibrium GDP $1,000 $750 $12,000 $2,250 3.) The four components of aggregate planned expenditure are the real interest rate, disposable income, wealth, and expected future income the real interest rate, consumption expenditure, investment, and government expenditures consumption...
Suppose that marginal propensity to consume is equal to 0.8 .The government has the balanced budget right decide to increase government spending by $100 billion. This increase in spending is partially financed by a $50 billion They now. increase in taxes. Answer following questions: a) As a result of this, what happen to GDP? b) As a result of this, what happen to government budget (still we have the balanced one, or it creates deficit or it creates any unbalanced...
Marginal propensity to consume is 0.8, and there is no trade, taxes or transfers in this economy. An increase of $1 billion in investment spending will cause O an increase of 0.8 billion dollars spending in the first round 5 billion dollars' worth of spending due to multiplier effects 4 billion dollars' worth of spending due to multiplier effects a $4 billion rightward shift in the AD curve
7. If marginal propensity to consume (mpc) is 0.8, tax rate (t) is 0.2, and marginal propensity to import (mpm )is 0.14, then the multiplier is: a) 4 b) 2 c) 3 d) 2.33 Your answer: Explanation: le 8. Given the value of the multiplier you got from question 7, if the government wanted to raise the equilibrium GDP by 100, it could: a) Raise only G by $100 b) Raise both G and T by 50 c) Raise only...
Suppose that the marginal propensity to consume in a country is 0.8, and the real potential output and current real GDP are respectively $800 billion and $700. To bring the economy to potential output, the government should increase its expenditure by $100 billion. True False
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity to import 0 autonomous consumption 4 exports 0 private investment 20 income tax rate 0 government expenditures 0 Income consumption investment government aggregate expenditures expenditures 0 10 20 30 40 50 60 70 80 90 What is equilibrium GDP?
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity to import 0 autonomous consumption 4 exports 0 private investment 20 income tax rate 0 government expenditures 0 Income consumption investment government aggregate expenditures expenditures 0 10 20 30 40 50 60 70 80 90 How much is consumption when income equals 10