Answered: 10. If there is an inflationary gap of…

10. If there is an inflationary gap of $400 Billion and the MPS is .2, how much would taxes have to increase to close the gap?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 30RQ: Under what general macroeconomic circumstances might a government use expansionary fiscal policy?...

See similar textbooks

Related questions

Q: If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much…

A: The contractionary gap means real GDP is less than the potential GDP such that that the economy is…

Q: Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the economy's…

A: Both a tax cut and increase in government spending are expansionary fiscal policy tools, aimed to…

Q: a). A recessionary gap is how much GDP needs to increase from the current GDP to achieve full…

A: We know that if there is no change in government expenditure, then a change in tax can lead to a…

Q: Which fiscal policy would be the most contractionary? a $100 billion decrease in government spending…

A: The fiscal policy represents the use of government spending and taxation. To foster strong and…

Q: Explain what the spending multiplier is. Describe the actions the government could take, using…

A: Spending measures the change in equilibrium GDP due to change in government spending. Spending…

Q: 4. If the AD excess is $400 billion and the MPC is 0.9, a) How much fiscal restraint is desired? b)…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Consider an economy where the marginal propensity to save is 0.15; the marginal propensity to import…

A: Marginal propensity to save (MPS) is 0.15 Marginal propensity to import (MPM) is 0.05 Marginal…

Q: Given the following information. C = 100+ 0.75Yd, (dengan, Yd=Y-T) 1 = 240 - 600r G = 50 T = 30 a.…

A: Disclaimer :- since you asked a multipart question we are solving the first 3 subparts as per…

Q: c = 205 + 0.9y what is the multiplier? %3D 100

Q: Consider an economy with the following situation: C = 50 +0.8 YdI =100;T = 100 G =150 a. Solve for…

A: Aggregate expenditure is the sum of consumption, investment and government purchases. AE = C + I +…

Q: (a) The hypothetical information in the following table shows what the situation will be in if the…

A: Fiscal policy means the expenditure that is incurred in constructing the roads, railways, and…

Q: Suppose AS decreases by $50 billion for every 1 percentage point increase in business tax rates. By…

A: Answer; Increase in tax rate = 28 -22 = 6%.

Q: a. You are studying an economy with an income tax rate, t1, of 32% and an MPS of 0.3. It is…

A: Answer: Given: Income tax rate = 32% = 0.32 MPS (marginal propensity to save) = 0.3 MPC (marginal…

Q: 4. If the Government Spending Multiplier is 3, the value of the Tax Multiplier is 5. If taxes…

A: The Government Spending multiplier is the change in equilibrium income due to one unit change in…

Q: J 7 What curve is meant to impacted by fiscal policy? What direction do policy makers hope to shift…

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and…

Q: hat is the 'Keynesian Fiscal Multiplier’ and things might decrease its magnitude? ve both the…

A: The initial rise in expenditure leads to multiple rise in the income level, such phenomenon is known…

Q: 2. Given: C = 250 + 0.8 Y I = 150 G = 300 TR = 100 NX = 100 t =0.25 i) Find the equilibrium level…

A: Hi, Thank you for the question. According to our policy, we can only answer up to 3 sub-parts per…

Q: Fiscal policymakers are faced with a $6 trillion dollar inflationary gap and are worried about…

A: Inflationary gap = $6 trillion MPC = 0.9 Change in tax = 0.5 trillion

Q: 3. That is the difference between Govemment Expenditures (G) and Government Transfers (tr, part of…

A: As economies and societies developed, the study of economics got more complicated. Hence, as a…

Q: 4. Assume the government cuts taxes and the marginal propensity to save is 0.4. a. Would this be…

A: The sum of marginal propensity to consume and marginal propensity to save is equal to 1. The…

Q: Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.5.…

A: Answer a) Spending multiplier = 1(1-MPC) =11-0.5=2

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75 Tax multiplier = (-MPC/1-MPC) Tax multiplier= (-0.75/1-0.75)Tax multiplier=…

Q: The following graph represents our economy Note MPCB CRAS SRAS PeLeve 14 100 14 Re OP n S 1. What…

Q: 8) Which of the following would not be considered an automatic stabilizer? A) legislation increasing…

A: Automatic stabilizers can be defined as the automatic changes that occur in the government imposed…

Q: To combat a recession, the Indian government enacts expansionary fiscal policy, which increases…

Q: Write and apply the concept of multiplier with the help of suitable example and diagram. How does…

A: Fiscal policy: It refers to the policy which is used by the government to correct the various…

Q: If the spending multiplier is 2.0 and the economy is in a $540 billion contractionary gap, how much…

A: Given information: Spending multiplier = 2 Contractionary gap = $540 billion.

Q: C = 450+0.4y I = 350 G = 150 X = 70 Z = 35+0.1y T = 0.15y Yf = 1550 - Calculate the size of…

A: Answer: Given: C = 450+0.4y I = 350 G = 150 X = 70 Z = 35+0.1y T = 0.15y Yf = 1550 Calculation: (1).…

Q: If the spending multiplier is 2.5 and the economy is in a $600 billion contractionary gap, how much…

A: Contractionary gap is also called recessionary gap it is a gap between actual output and potential…

Q: 16) What is the first signal that policy makers may need to examine expansionary fiscal economic…

A: Expansionary fiscal policy : Due to increment in government expenditure , there will be increase in…

Q: Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150 a. To…

A: Aggregate expenditure is the sum of consumption, investment and government purchases. AE = C + I +…

Q: 1) If the government increases spending by $400, and the MPS is 0.4, how much will the increase in…

A: “Since it is a multiple question, here we will solve the first one for you. If you want to get…

Q: 1. Indicate whether each of the following government actions are Expansionary or Contractionary.…

A: Expansionary OR Contractionary Reduce or increase Leakage Increase or decrease injection Automatic…

Q: Should the government fight recessions with spending hikes rather than tax cuts ? Explain

A: Government spending and tax reductions have different multiplying effects on the economy.

Q: a) What are the three fiscal policy tools and how would each be used to counter a contractionary…

A: Hello, Thank you for the question. Since there are multiple questions posted here, only the first…

Q: What is marginal propensity to consume and marginal tax rate? Why is the gov expenditure multiplier…

A: In Keynesian economics, the change in aggregate expenditure in the economy is able to affect the…

Q: 1. Indicate whether each of the following government actions are Expansionary or Contractionary.…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: a) What are the three fiscal policy tools and how would each be used to counter a contractionary…

A: Fiscal policy refers to changes in government purchases and taxes, which are intended to achieve the…

Q: Suppose that there are no crowding-out effects and the MPC is 0.8. By how much must the government…

A: Hi! thanks for the questions but as per the guidelines, we can answer only one question at one time.…

Q: Why did some governments feel that they had to introduce “austerity” fiscal policies soon after the…

A: A Fiscal Policy is an instrument of the government and reefers to the use of government spending and…

Q: 4. In the US the unemployment rate for January 2000 was 4.0%. In January 2000, the US had GDP of…

A: Answer to the three sub parts are as follows:

Q: 15. If the MPC is 3/4, what is the government spending multiplier in the simple Keynesian model?

A: Given MPC = 3 / 4 MPC = 0.75

Concept explainers

Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.

Question

10. If there is an inflationary gap of $400 Billion and the MPS is .2, how much would taxes have
to increase to close the gap?
acer

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1ss

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
Macroeconomics: An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government raise taxes to achieve its objective? A. $6 billionB. $12 billionC. $16 billionD. $9 billion
An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is 0.8 By how much should the government raise taxes to achieve its objective? A. $9 billion B. $28 billion C. $7 Billion D. $180 Billion
Assuming a tax rate of 40 percent, compute thebefore-tax real interest rate and the after-tax realinterest rate for each of the following cases.a. The nominal interest rate is 10 percent, and theinflation rate is 5 percent.b. The nominal interest rate is 6 percent, and theinflation rate is 2 percent.c. The nominal interest rate is 4 percent, and theinflation rate is 1 percent.
If MPC =2/3, actual GDP = $14,000 and potential GDP = $13,100, there is a __________(recessionary / inflationary) gap of $_____ and a _________ (decrease / increase) in personal taxes of$______ would eliminate the gap.
13. Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of thetax multiplier is:(A) -4. (B) -20. (C) -10. (D) -5.
12. If the marginal propensity to save is 0.3, the tax multiplier is:(A) -2.5. (B) -1.67. (C) -1.5. (D) -2.33.
Assume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 + (0.1)(Y* - Y) YD = Y - TA + TR NXo = - 40 TA = (0.25)Y TRo = 50 How do I calculate the multiplier? Thank you.
consumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe the tax cuts temporary. true or false
A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this moneywill be spend on the town will by factory personnel. The people in the town who receive this money areexpected to spend 60% of what they receive in the town, and so on.(a) What is the total of all this spending (called the “total economic impact”) of the factory on the towneach year?(b) How much additional spending will be generated by a 10 million dollar tax rebate if 60% of allincome is spent?
3. Derive the expression for government purchase multiplier in Keynesian model. If the value of G multiplier = 2.55 How do you interpret this? Explain with Graph. Apply your own understanding (based on Book N. GREGORY MANKIW 7th Edition) Not more than 13 sentence
Only typed answer and please don't use chatgpt Why will temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a. Because viewed the tax increase as permanent. b. Because people choose to increase their savings. C become people viewed taco increases temporarily d. Consumption expenditure are not related to level of taxtation