A country has an initial real output of $162 Billion. What would the final output be expected to be if: a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35 b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75 c. The government makes no changes to taxes or spending.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter8: The Keynesian Model

Section: Chapter Questions

Problem 3SQP

See similar textbooks

Related questions

Q: If consumption is $6 billion when disposable income is $0, and if the marginal propensity to save is…

A: Answer: Given, Consumption at zero level of disposable income (autonomous consumption)= $6 billion…

Q: 1. (MPC and MPS) If consumption increases by $12 billion when real disposable income increases by…

A: MPC=1/MPS MPS=15-12=3 =1/3=0.3 Therefore MPC=0.3.

Q: Suppose that the recent economic outlook in the country of Mountainia has been the opposite.…

A: Multiplier = 1/mps = 1/0.05 = 20

Q: The government raises taxes by $100 billion. If the marginal propensity to consume is 0.8 What…

A: Marginal propensity to consume (MPC) is the proportion of an aggregate raise in pay that a consumer…

Q: An increase in autonomous investment spending will likely cause ___________

A: Spending multiplier is the ratio of change in equilibrium GDP due to change in autonomous spending.…

Q: If the marginal propensity to save is 0.2 in an economy, a $30 billion rise in investment spending…

A: The spending multiplier says that when there is an increase in any type of spending in the economy…

Q: Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.50Yd and…

A: Gross Domestic Product (GDP) is the value of all the goods and services produced domestically in a…

Q: Congratulations! You've just been appointed the chair of the Council of Economic Advisers in…

A: Being as Council of economics advisors you have the responsibility to achieve the objectives of…

Q: Suppose that autonomous consumption is 2,190, government purchases are 590, taxes are 0, planned…

A: An autonomous spending depicts the parts of an economy's total use that are not influenced by that…

Q: Consider an economy with the following consumption function: C = 400 + 0.60YD, and investment…

A: Consumption function: C=400+0.60YD .... (1) I=600 Marginal propensity to consume increases by…

Q: With no taxes or transfers, disposable income = GDP, denoted Y. In trillions of dollars, - marginal…

Q: A national newspaper’s headline reads “Business Confidence Reaches Highest Level in 5 Years.” (a)…

A: In economics, the loanable funds notion is a market interest rate theory. According to this…

Q: In the economy of Spendsalot, the marginal propensity to save, MPS, is 0.8. What is the marginal…

A: Marginal propensity to save is the proportion of income saved.

Q: Consider an economy in which autonomous consumption, planned autonomous investment, autonomous…

A: The GDP is $19000 and the MPC is 0.75. So, consumption will be: Consumption =GDP×MPCConsumption…

Q: Investment in an economy increases by $1,000 million. Suppose marginal propensity to save is zero.…

A: # We know well that the value of multiplier is given as:- k = 1/MPS Also the multiplier is also…

Q: c. The government makes no changes to taxes or spending. d. The government decreases spending…

A: If government makes no change in fiscal policy which is under consideration then there would be no…

Q: What will be the impact on real GDP?

A: Investment determined independently of changes in income is known as Autonomous Investment. Marginal…

Q: With no taxes or transfers, disposable income = GDP, denoted Y. In trillions of dollars, - marginal…

A: MPS = 0.75 MPC = 1-MPS MPC = 1-0.75 = 0.25 Autonomous Consumption = 10 Planned Investment = 10

Q: There is an increase in investment of $2000 million in an economy. MPC is given to be as 0.…

A: The given information is as follows:- Increase in investment expenditure = $2000 MPC = 0 We have to…

Q: The MPS is 1 + MPC. O the change in saving divided by the change in income. total saving divided by…

A: Marginal propensity to save (MPS): - it is a fraction of the change in income that is being saved.

Q: MPC and MPS) If consumption increases by $12 billion when real disposable income increases by $15…

A: MPC is nothing but then ratio of change in consumption to the change in real disposable income.

Q: Suppose that the marginal propensity to save is dS dy = 0.21 (in billions of dollars) and…

A: Consumption function, in financial aspects, the connection between consumer spending(s) and the…

Q: Level of investment goes up by 200. What happens with the level of GDP if you know that MPS = 0,9.…

A: Given; Increase in level of investment; ∆I=200 Marginal propensity to save; MPS= 0.9 Marginal…

Q: 3 billion when disposable

A: The ‘consumption function’ is an economic formula which indicates the ‘functional relationship’…

Q: A two sector economy has a total income of rs 150 billion and marginal propensity to consume (MPC)…

A: The total income of $150 billion would result in the real GDP. The ratio of change in consumption…

Q: The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if the…

A: The Keynesian model would result in the determination of the price level and the real GDP. The…

Q: In a closed economy with no government, aggregate expenditure is O saving plus investment.…

A: A closed economy is a type of economy where the import and export of goods and services don't…

Q: The country is experiencing a serious rise in inflation which the government wants to control…

A: Gross domestic product is the market value of all goods and services produced in the economy in a…

Q: If the marginal propensity to save is 0.25, and the government increases its purchases of goods and…

A: The economics as a study is based upon the idea that the resources which are present with the…

Q: Suppose that the marginal propensity to save is ds = 0.29 dy (in billions of dollars) and that…

A: Given: dSdy=0.29To find the national consumption function:dCdy=1-dSdy

Q: Suppose a closed economy has an intended investment of 100 and an aggregate consumption function…

A: Given information: C=250 + 0.75Yd -----> Consumption function I = 100 ------------> Investment…

Q: In an economy with an MPC of 0.8 and real output of 5000 billion, if government spending increase by…

A: The aggregate demand (AD) and expenditure reflects the total demand and expenditure on the purchase…

Q: A national newspaper's headline reads "Business Confidence Reaches Highest Level in 5 Years." (a)…

A: a) If the business confidence increases, they want to invest in new projects and assets and for…

Q: Africa's government has increased its spending this year, leading to a growing budget deficit. How…

A: Budget deficit occurs when the expenditure of the economy exceeds the revenue earned by the economy…

Q: Suppose that the marginal propensity to save is ds = 0.25 (in billions of dollars) dy and that…

A: Given: Marginal Propensity to Save (MPS) = 0.25 Autonomous consumption i.e. the consumption at 0…

Q: Question 1 Suppose MPC and the tax rate are both equal to 0.2 for a closed economy. Assuming no…

A: Given tax rate = 20 % MPC = 0.2 MPS = 1 – MPC = 0.8

Q: Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and…

A: Given Information- Aggregate consumption function C = 300 + 0.75Yd Equilibrium level of income…

Q: Suppose the MPC in an economy is 0.65. The APC is initially 0.9 and disposable income is $6 billion.…

A: Disposable income is the income available to the people after paying the taxes and social security…

Q: The government raises lump-sum taxes on income by 100 billion, and in the long run loanable funds…

A: Given; Increase in taxes= 100 billion Marginal propensity to consume= 0.6 Marginal propensity to…

Q: Suppose GDP is $8 trillion, taxes are $1.5 trillion,private saving is $0.5 trillion, and public…

A: National income is the total market value of all final goods and services produced in an economy…

Question

A country has an initial real output of $162 Billion. What would the final output be expected to be if:
a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35
b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75
c. The government makes no changes to taxes or spending.
d. The government decreases spending nationwide by $9 billion in a country where people are likely to withdraw 60 cents on every new dollar of income.

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 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

Could you do C and D A country has an initial real output of $162 Billion. What would the final output be expected to be if:a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75c. The government makes no changes to taxes or spending.d. The government decreases spending nationwide by $9 billion in a country where people are likely to withdraw 60 cents on every new dollar of income.
Governments attempt to stimulate economies by offering firms temporary investment tax credits. Explain the effects of this measure on investment spending. Would you expect a permanent or temporary measure to have more effect.
in 2019 fiscal year estimated that Ghanaians saved 20 percent of their disposable income; however, due to overconsumption in the previous year, autonomous saving for 2019 was negative 100 million Ghana cedis. The government of Ghana imposed a lump sum tax of Gh ₡ 20 million. In addition to the lump sum tax the government also took 20 percent of all incomesearned in the economy in the form of proportional tax. The total government expenditure was GH ₡50 million in 2019. Total investment recorded for 2019 was 66 million. (A) Determine the tax function for this economy, derive the consumption function based on the above information and write out the aggregate demand equation (b) Determine the equilibrium consumption and calculate the value of the government expenditure multiplier for this economy and interpret your result (c) Calculate the total tax revenue to the government
If business taxes are reduced and the real interest rate increases: * A. consumption and saving will necessarily increase. B. the level of investment spending might either increase or decrease. C. the level of investment spending will necessarily increase D. the level of investment spending will necessarily decrease
Suppose the MPC in an economy is 0.55. The APC is initially 0.65 and disposable income is $2 billion. If disposable income increases to $16 billion, what is the new level of saving? $5.6 billion $0.7 billion $7.2 billion $7.0 billion
If the marginal propensity to save is 0.15 in an economy, a $15 billion rise in consumption spending will increase: A GDP by $20 billion. B saving by $25 billion. C GDP by $100 billion. D GDP by $18 billion.
Investment in an economy increases by $1,000 million. Suppose marginal propensity to save is zero. But can you say about the increase in national income ,calculate.
Assume MPC is 0.9 and autonomous investment increases by $500 billion. What will be the impact on real GDP?
Suppose that the marginal propensity to save is dS dy = 0.93 − ln(y + 1) y + 1 (in billions of dollars) and that consumption is $6.05 billion when disposable income is $0. Find the national consumption function. C(y) =
Assume that total expenditure E comprises the sum of government consumption, G, household consumption, C, and investment, I. Assume a closed macroeconomic system, so that income equals expenditure Y=E. If we define household saving, SH, as SH=Y-T-C, where the cunsumption function is a fixed proportion of disposable income, C=c(Y-T), which of the following will be true? a. Higher government spending alongside unchanged taxation will lead to higher investment and higher household saving b. Higher government spending alongside unchanged taxation will have no effect on household saving or investment c. Higher government spending alongside unchanged taxation will lead to higher household saving d. Higher government spending alongside unchanged taxation will lead to lower household saving
Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.50Yd and generates $2400 output and income in equilibrium. Suppose also that the government spends 400 and imposes a lump-sum tax of 50. What is the level of intended investment? (round your answer to the nearest whole value)
Q-1 The following table shows income and consumption: Calculate: A- Saving (S), B- Marginal propensity to consume (MPC), C-Marginal propensity to save (MPS), D- Average propensity to consume (APC) E- Average propensity to save (APS). Q-2 Compute the (a) Number of unemployed, (b) Unemployment-rate, (c) Population, and (d) Labor force participation rate, using this data: Number of employed = 1800 million Not in labour force =730 million Number of Labour force =2500 million Q-3 Discuss how to control or reduce the Inflation and Unemployment.