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- If the marginal propensity to consume is 0.75, byhow much would government spending have to rise toincrease output by $1,000 billion? By how muchwould taxes need to decrease to increase output by$1,000 billion?Suppose that due ot a fiscal stimulus, there is an increase in disposable incomes of $100 billion in the first round. Then, $33 billion was spent in consumption from this initial change of the disposable incomes. Following the same marginal propensity to consume, how much is the change in consumption spending in the next round from the $33 billion?Suppose a closed economy with no government spending which in equilibrium is producing an output and income of 2500. Suppose also that the marginal propensity to consume is 0.80, and that, if at full employment, the economy would produce an output and income of 3900 By how much would the government need to cut taxes (T) to bring the economy to full employment?
- a. Suppose that in an economy with no government, the aggregate expenditurefunction is: AE = 50+0.75Y with an investment level of 100.i. Determine the level of planned expenditure when income is 150.ii. Draw a diagram showing the aggregate expenditure functioniii. What are the levels of autonomous consumption and inducedconsumption at income levels of 150 and 200.b. An open economy with a government sector is in equilibrium. Assume thefollowing:1. Marginal propensity to save = 0.42. Marginal propensity to tax = 0.23. Marginal propensity to import = 0.2i. Solve for the value the government multiplier ii. Determine by how much the equilibrium level of national incomewould fall, if injections in the economy are reduced by Ks.60m.iii. Determine the new level of income if taxes increased by KS. 20c. Propose four reasons why economists should not consider GDP an effectivemeasure of the standard of living in a country.Only typed answer Explain why the multiplier falls when taxes depend on income. .1 Assume the following for the economy of a country: a. Consumption function: C = 60 + 0.75Yd b. Investment: I = 75 c. Government spending: G = 45 d. Net taxes: T = - 25 + 0.2Y e. Disposable income: Yd. = Y - T f. Equilibrium: Y = C + I + G Solve for equilibrium income. How much does the government collect in net taxes when the economy is in equilibrium? What is the government’s budget deficit or surplus?a) Suppose that there are no crowding-out effects and the MPC is 0.8. By how much must the government increase expenditures shift the aggregate-demand curve right $10 billion? b. The model of Long-run Growth, proposes that fiscal policy can have lasting effects on savings, investment, and economic growth. On the other hand, the model of Aggregate Demand-Aggregate Supply suggests that the only long run effect of fiscal policy is an increase in the price level. How could you use the Aggregate Demand and Aggregate Supply model for a more accurate description of the short-run and long-run effects of an increase in government spending? Could you distinguish between different uses of government expenditures to predict their effects on prices and output?
- i need this in word not handwritten Q7. Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 S = $40 I (planned) = $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Yd and S = 0.2Yd. Is the economy of Nurd in equilibrium? What is Nurd’s equilibrium level of income? What is likely to happen in the coming months if the government takes no action? 2. If $200 is the “full-employment” level of Y, what fiscal policy might the government follow if its goal is full employment? 3. If the full-employment level of Y is $250, what fiscal policy might the government follow? 4. Suppose Y = $200, C = $160, S = $40, and I = $40. Is Nurd’s economy in equilibrium? 5. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains constant, what…Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?Suppose that the marginal propensity to consume is 0.75. If the government decreases spending by Ksh 500 billion, what is the change in output? If the government decreases taxes by Ksh 500 billion, what is the change in (ii) output? If the government decreases transfer payments by ksh 500 billion, what is the change in output If the government decreases spending by ksh 500 billion and at the same time decreases taxes by ksh 500 billion, what is the change in output?
- 1. Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss) a) How much money should the government spend to eliminate this GDP loss? b) Calculate the tax cut needed to eliminate this GDP loss. 2. Calculate MPC, MPS and the Multiplier if consumption expenditure increases by $4,000 as a result of increase in income from $40,000 to $46,000. 3. Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $500. This would be all the questions and work to these questions. There's nothing more to it.1. Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss) a) How much money should the government spend to eliminate this GDP loss? b) Calculate the tax cut needed to eliminate this GDP loss. 2. Calculate MPC, MPS and the Multiplier if consumption expenditure increases by $4,000 as a result of increase in income from $40,000 to $46,000. 3. Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $500.Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.5. how much must the government cut its spending? b) what would be the effect of the government increasing taxes by this amount?
