Homework Help is Here – Start Your Trial Now!
Business
Economics
15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall

15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall

Survey Of Economics
Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter17: Federal Deficits, Surpluses, And The National Debt
Section: Chapter Questions
Problem 7SQP
See similar textbooks
icon
Related questions
Question

15 

Chapter 11 Fiscal Policy 247 8 Why do government budget deficits grow during recessions? . Taxes can be progressive, regressive, or proportional. Define each, and briefly offer an argument for why income taxes are usually progressive. 10. What is a value-added tax (VAT), and what is an advantage of such a tax relative to an income tax? The following exercises are based on the $10 billion, what happens to the equilibrium level of real GDP? Use the following equations for exercises 16-18. C = $100 +.8Y I = $200 G = $250 Appendix to this chapter. Answer exercises 11-14 on the basis of the following information. Assume that equilibrium real GDP is $800 billion, potential real GDP is $950 billion, the MPC is .80, and the MPI is .40. 11. What is the size of the GDP gap? 12. How much must government spending increase to eliminate the GDP gap? 13. How much must taxes fall to eliminate the GDP gap? 14. If government spending and taxes both change by the same amount, how much must they change to eliminate the recessionary gap? 15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall X = $100 2Y 16. What is the equilibrium level of real GDP? 17. What is the new equilibrium level of real GDP if government spending increases by $150? 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150? 19. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?
Transcribed Image Text:Chapter 11 Fiscal Policy 247 8 Why do government budget deficits grow during recessions? . Taxes can be progressive, regressive, or proportional. Define each, and briefly offer an argument for why income taxes are usually progressive. 10. What is a value-added tax (VAT), and what is an advantage of such a tax relative to an income tax? The following exercises are based on the $10 billion, what happens to the equilibrium level of real GDP? Use the following equations for exercises 16-18. C = $100 +.8Y I = $200 G = $250 Appendix to this chapter. Answer exercises 11-14 on the basis of the following information. Assume that equilibrium real GDP is $800 billion, potential real GDP is $950 billion, the MPC is .80, and the MPI is .40. 11. What is the size of the GDP gap? 12. How much must government spending increase to eliminate the GDP gap? 13. How much must taxes fall to eliminate the GDP gap? 14. If government spending and taxes both change by the same amount, how much must they change to eliminate the recessionary gap? 15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall X = $100 2Y 16. What is the equilibrium level of real GDP? 17. What is the new equilibrium level of real GDP if government spending increases by $150? 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150? 19. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Inflation and Unemployment
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
Recommended textbooks for you
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Macroeconomics
Macroeconomics
Economics
ISBN:
9781337617390
Author:
Roger A. Arnold
Publisher:
Cengage Learning
ECON MACRO
ECON MACRO
Economics
ISBN:
9781337000529
Author:
William A. McEachern
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS