4. Suppose the economy is in a recessionary gap of $5,000 and the output multiplier is 4. By how much should government expenditures change in order to eliminate this gap? * -$5,000 +$1,250 -$1,250 +$5,000

4. Suppose the economy is in a recessionary gap of $5,000 and the output multiplier is 4. By how much should government expenditures change in order to eliminate this gap? * -$5,000 +$1,250 -$1,250 +$5,000

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.6P

See similar textbooks

Related questions

Q: 1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I= 300…

A: Disclaimer: As per Bartleby's policy, I am providing you with the answers to the first three…

Q: 7. Circle out the right answer! If marginal propensity to consume is 0.2 and taxes increase by 40,…

A: Ans. The tax multiplier is the ratio of change in income ( GDP) and changes in the taxes in the…

Q: Do you think that the marginal propensity to consume out of current income differs between tenured…

A: The portion of someone's total earnings that are utilized for spending, is the person's " marginal…

Q: government spending and taxes both change by the same amount, how much must they chan

A: An inflationary gap, in economics, is the value by which the actual GDP exceeds potential…

Q: 1. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: (i) Given that the households consume $0.70 of every increase in income by a dollar, the marginal…

Q: 1. A closed economy without a government has an aggregate autonomous consumer spending of 2000…

A: 1. Given A closed economy without a government. Aggregate autonomous consumer spending = 2000…

Q: The spending multiplier, m, is 1/(1-MPC). a) If the MPC is 0.9, what is the spending multiplier? b)…

A: A multiplier is a numerical coefficient used in economics to illustrate how variations in total…

Q: Question 3 Given the following information: 1= 150, G = 150, T-150 and C = 150 +0.75(Yd) Which of…

A: Here, given information is, Investment (I): 150 Government spending (G): 150 Taxes (T): 150…

Q: 4. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: Marginal propensity to consume refers to the change in consumption due to change in income. Given,…

Q: 1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I= 300…

A: Given information C= 400+(8/9)*DI I=300 G=800 T-1/2*Y X-M=0

Q: 5. Fiscal policy, the money market, and aggregate demand Consider a hypothetical economy in which…

A: Each household spends $0.75 of each additional dollar they earn. It means the marginal propensity…

Q: e figure above: - Find the equilibrium GDP. What happens to the left of that equilibrium? What…

A: The equilibrium condition: Y = C+I+G.

Q: The spending multiplier, m, is 1/(1-MPC). a) If the MPC is 0.9, what is the spending multiplier? b)…

A: Marginal Propensity to Consume is the proportion of an increase in income that gets spent on…

Q: . If the marginal propensity to save is 0.3, the tax multiplier is: (A) -2.5. (B) -1.67. (C) -1.5.…

A: Marginal propensity to save (MPS): - it is a fraction of total income that a person saves.

Q: 4. Suppose the economy is in a recessionary gap of $5,000 and the output multiplier is 4. By how…

A: GIVEN Suppose the economy is in a recessionary gap of $5,000 and the output multiplier is 4

Q: 2. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: Given, This is a closed economy. Household Spend = $0.70 for every additional dollar. Savings =…

Q: 34 64. If the marginal propensity to save (MPS) is small, O a. make the simple multiplier larger. O…

A: Multiplier =1/1-MPC or 1/MPS

Q: 18. If MPC = 0.65, find the government spending multiplier. If government spending increases by 100,…

A: Given MPC = 0.65 MPS = 1 – MPC = 0.35 Income = 500 Spending multiplier = 1 / MPS = 2.86

Q: 2. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: Given, Household spending= $0.70 of each additional dollar Savings = $0.30 of additional dollar

Q: A) 200 B) 100 C) 500 D) 300 Answer: D Diff: 2 Topic: Fiscal Policy at Work: Multiplier Effects…

A: Short run equilibrium is the point where the aggregate supply is equal to the aggregate demand in…

Q: APPLICATION: PROBLEM-SOLVING 8.1 (SHOW COMPLETE SOLUTIONS) Fill in the blanks in the table below.…

A: The marginal propensity to consume is the change in consumption due to a change in income. MPC=∆C∆Y,…

Q: a) Suppose economists observe that an increase in government spending of 300 crore taka raises the…

Q: 2,500 2,000 250 250 100 3,000 2,400 250 250 100 3,500 2,800 250 250 100 If potential GDP is $4,000…

A: Government spending refers to money spent by the public sector on the acquisition of goods and…

Q: n a model with demand-determined output and a constant price level, a decrease in the net tax rate…

A: Consumption is the sum of autonomous and induced consumption. C = a + cY; where a is autonomous…

Q: 2. In an economy without government purchases, transfers, or taxes, and without imports or exports,…

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

Q: Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and…

A: f) Full employment GDP is calculated as follows. Planned Expenditure=Autonomous consumption…

Q: 3. A fall in the income tax rate will O lower the multiplier and lower equilibrium income. O raise…

A: Macroeconomics is a part of economics that deals with production, decision and allocation concerning…

Q: 6. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: Since we only answer up to 3 sub-parts we will answer the first 3. Please resubmit the question…

Q: 3. The spending multiplier effect Consider a hypothetical economy. Households spend $0.50 of each…

A: Households spend $0.50 of each additional dollar they earn It means MPC is 0.50…

Q: 1. If an economy has an MPC of 0.9 what is the multiplier? 2. If an economy has an MPS of 0.2 what…

A: Multiplier Amount of new income that is generated from an addition of extra income. Marginal…

Q: 5. If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase…

A: Hi! thankyou for the question but as per the guidelines, we answer one question at one time. Kindly…

Q: 5. If an economy has a recessionary expenditure gap, the government could attempt to bring the taxes…

A: Recessionary gap is the gap where economy real GDP is less than Full employment GDP , Government…

Q: The spending multiplier, m, is 1/(1 MPC). a) If the MPC is 0.9. what is the spending multiplier? b)…

A: Spending multiplier show the circulation of money how much time occurs in economy so here we can…

Q: 1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I= 300…

A: Initially, the economy was described in the following set of equation:…

Q: EOC ЕОC 8.13 Explain why the multiplier effect of an increase in consumption spending of $100…

A: A multiplier is a term used in economics to describe an economic element that, when raised or…

Q: 4. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: The multiplier effect is the theory that government spending to stimulate the economy causes an…

Q: 11. Given the following Consumption Function as C = 350 + 0.75 (Y) ; and actual equilibrium real GDP…

A: Solution Option B is correct $25

Q: 1. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: The multiplier effect asserts that as government expenditure increases to stimulate the economy,…

Q: Consumption is given by C-100+0.8YD and 1-50. The fiscal policy is summarized by G-200, TR…

Q: 16. Given the following Consumption Function as C = 350 + 0.75 (Y) ; and actual equilibrium real GDP…

A: The equilbrium in the economy occurs at the point where the aggregate expenditure is equal to the…

Q: 13. What is the value of autonomous cônsumption? 14. If government spending increases by $15, what…

A: The concept that says that the market should expand the higher the government invests is a Keynesian…

Question

4. Suppose the economy is in a recessionary gap of $5,000 and the output
multiplier is 4. By how much should government expenditures change in order to
eliminate this gap? *
-$5,000
+$1,250
-$1,250
+$5,000
TOSHIBA

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 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

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

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?
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
8 Explain how automatic stabilisers can slow down a recession. Explain two (2) fiscal measures the federal government of Australia introduced in the 2021/2022 federal budget to reduce unemployment.
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.
pls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?
Give typed solution only assume an economy has an MPC of .5 and their full employment level of output is $500 billion. If their current GDP is $600 billion, what could their government do to try ans correct this? a) decrease taxes by $50 billion b) decrease government spending by $50 billion c) increase government spending by $50 billion d) increase taxes by $50 billion
2. In a closed economy with no government, a $1 billion increase in initial spending leads to a $5 billion increase in total income or output. a. What is the multiplier? b.What is the value of marginal propensity to save? c.What is the value marginal propensity to consume?
Assume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.
4. A country’s consumer spending is defined by the following equation:Consumer spending = 365 + 0.75 (Disposable Income)a. Draw a diagram to represent this equation. b. Assuming no government, what will the Marginal Propensity to Save (MPS) in this country.c. What will be Consumer spending if disposable income in this country is 1000? d. If suddenly this country’s wealth increases, how do you think the equation might change.Also show it in a diagram.
Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and planned government purchases = $4000. All planned expenditure are autonomous expenditures. Taxes ( T) is = zero, and net exports = zero. f) If at the current level of equilibrium, the economy is experiencing an inflationary gap $2000. How much is the full employment GDP? g) How much does planned investment change to close the inflationary gap? h) Graph the planned expenditure function. Show the change (shift) for a change in investment to close the gap. Show equilibrium points, full-employment GDP. Label all points clearly
Please see attachment Answer neatly Show all your work. Based on the above diagram: 1. Calculate MPC? 2. If Private Investment increases by 100, calculate the new level of NI. 3. If full-employment NI is at 3000, by how much should Government spending change? 4. What is the new NI, If 1/2 of those government expenditures are financed through taxes?