Q: Two countries are in a recession. Country A has an MPC of 0.8 and Country B has an MPC of 0.6. In…
A: Country A MPC = 0.8G Government Spending Multiplier=11-MPCGovernment Spending…
Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…
A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…
Q: Calculate MPS if we know that MPC Is 0.67
A: The information given is the value of Marginal propensity to Consume which is:- 0.67 We have to find…
Q: The relationship between changes in spending and Real GDP without price increase is: a. Economic…
A: Real GDP is the value of goods and services produced in the economy in a given time period excluding…
Q: If output is above the level of spending balance, then A income will increase. В the marginal…
A: Equilibrium within the Keynesian Cross Diagram. If output was above the equilibrium level, at H,…
Q: What is the MPI?
A: as we know that economy is in equilibrium when Aggregate demand and aggregate supply are equal. Y=…
Q: A temporary increase in government expenditure will a. Shift the saving curve to the right b.…
A: Government expenditure (G): - government expenditure is the spending made by the government on the…
Q: An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following: National…
A: "Marginal propensity to consume represents the additional income that a person spends on consumption…
Q: If the MPC In an economy Is 0.80, government could close a recessionary expenditure gap of $100…
A: Meaning of Money Multiplier: As from the word, the money multiplier refers to the situation under…
Q: An economy is at full employment. Which of the following events can create a recessionary gap? A.An…
A: Recessionary gap : Anything that decreases the net expenditure line, such as a decrease in demand,…
Q: What would happen to real GDP and the price level if the government decides to boost expenditure…
A: GDP calculates the monetary value of the final goods and services—those purchased by the…
Q: The government of a country decides to double its current level of spending, causing real GDP to…
A: Gross domestic product (GDP): - GDP is the market value of all final goods and services produced in…
Q: The value of consumption at the equilibrium le of output and income is? Aggregate spending at full…
A: A recessionary gap corresponds to a positive GDP gap where actual GDP is less than potential, while…
Q: True or False If spending exceeds output, real GDP will decline as firms cut back on production.
A: If Actual Spending is greater than the Output, then more is being demanded than is being supplied.…
Q: How does the MPC differ from the MPS?
A: Meaning of Marginal Propensity to Consume (MPC): The term marginal propensity to consume refers to…
Q: Consider an economy that is operating below the full-employment level of real GDP. What would be the…
A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…
Q: Keynesians believe that the multiplier effect of an increase in government spending will be that of…
A: Answer to the last two parts are given:
Q: If there is a recessionary gap of $200 Billion and the MPC is .9, how much would government spending…
A: Hi. Since there are two questions, we will solve only the first one. 9. Recessionary gap is given by…
Q: Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a…
A: Recessionary Gap: The term recessionary gap refers to the economic situation when the real GDP of…
Q: Given the following consumption fiction, C= 100 + 0.6YD calculate by how much induced consumption…
A: We are going to find the change in consumption spending to answer this question.
Q: Which of the following is used as a remedial measure during a recession in an economy? a. Decrease…
A: A recession refers to a period of economic slowdown. The recession is characterized by low levels of…
Q: suppose the government wishes to eliminate a recessionary GAP of 100 billion and the MPC is .75.…
A: Recessionary gap is when the country's GDP is lower than its GDP at full employment level.…
Q: An increase in government spending will likely cause which of the following? An increase in the…
A: The macroeconomic equilibrium in an economy is determined by the aggregate demand and aggregate…
Q: Definition of expenditure control measure
A: Expenditure can be defined as the payments made for the purchase of any goods or services where…
Q: Sir John Mayard Keynes said that the only time a should be balanced is when the economy is at full…
A: Full employment refers to an economy in which all available labour resources are used most…
Q: Use the graph to answer the following question: Investment Demand Quantity of Investment If the…
A: Fiscal policy, measures utilized by state run administrations to settle the economy, explicitly by…
Q: Calculate the net cumulative change in the aggregate expenditure if taxes were cut by $200 billion…
A: Marginal propensity to consume measures the proportion of extra income that is spent on consumption.…
Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $100…
A: ANSWER The marginal propensity to consumer (MPC) refers to the change in the change in the…
Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $160…
A: Here, it is given that MPC is 0.8, which implies that an increase in income by 1 percent will lead…
Q: The government spends an additional $926 billion and the marginal propensity to consume is 66%. How…
A: According to the question, it is given that : The government spends an additional $926 billion The…
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: the MPC is
A: MPC means marginal propensity to consume. MPC refers to proportion of additional unit of income…
Q: Provide a brief explanation for autonomous and induced expenditures.
A: Expenditures represents the amount spent on purchase of goods and services. It includes expenditures…
Q: An economy is at full employment. Which of the following can create an inflationary gap. Group of…
A: An inflationary gap exists when the demand for goods and services exceeds production due to factors…
Q: If the MPC is .6 and the equilibrium GDP is $30 billion below the full employment GDP, then the size…
A: Recessionary expenditure gap = (Full employment GDP - Equilibrium GDP) / Multiplier, where…
Q: overnments attempt to stimulate economies by offering firms temporary investment tax credits.…
A: Tax credits are the subsidy in taxes provided by the government.
Q: The MPC is 0.5. what happens to the real GDP if the government increases spending by $10 million?
A: Given MPC = 0.5 Increase in government spending = $10
Q: The expenditure line is steeper than the 45-degree line. slopes upward because consumption depends…
A: Expenditure line is flatter than a 45 degree line. this is because for every increase in disposable…
Q: If government spending rises by £500 million in an economy where the marginal propensity to spend is…
A: Marginal Propensity to spend or consume (MPC) represent that proportion of increase in income that…
Q: TRUE/FALSE If aggregate expenditures exceed aggregate income then inventories will rise and firms…
A: The statement, given in the question "If aggregate expenditures exceed aggregate income then…
Q: If the MPC in an economy is 0.90, a $4 billion increase in government spending will ultimately…
A: Answer: Given, MPC = 0.90 Change in Government spending=44 billion The following formula will be…
Q: Governments attempt to stimulate economics by offering firms temporary investment tax credits.…
A: The government action is required to correct economic disequilibrium if there is a fall in the…
Q: Which component of spending was the largest contributing factor to the downturn in spending during…
A: Investment was the largest contributing factor to the downturn in spending during the double-dip…
Q: If an economy is in recession, discuss the differing effects created by a tax cut vs. a GDP-G…
A: In an economy, recession refers to a situation when the actual output level falls short of the…
Q: What is the aggregate expenditures function?
A: Economics is the study of allocation, distribution and production of resources. It has two branches-…
Step by step
Solved in 2 steps
- Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. Elements £ billions Consumption (total) 80 Investment 9 Government Expenditure 6 Imports 15 Exports 8 What is the current equilibrium level of income? What is the level of injections? What is the level of withdrawals? If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier? What is the value of the multiplier? Comment on the results in part (3) and (4).Question 3: At a level of National Income of AED 30,000 Million, the government announced an increase in expenditures from AED 1000 Million to AED 1500 Million as a stimulus package for infrastructure development and at the same time government also announced an increase in tax from AED 1000 Million to AED 1600 Million. The marginal propensity to consume (MPC) for the country is 0.75. Find the impact of these changes on National Income. Explain the leakages of multiplier(b)Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 0.5. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. (i)Calculate the national income equilibrium. (ii)Based on your answer in (i), show the aggregate expenditure graph. (iii)Explain what would happen to the national income equilibrium if the investment changes by RM100 million.
- 19 - How does the increase in total expenditures affect the equilibrium income level?A) remains constantB) IncreasesC) first increase and then decreaseD) DecreasesE) Decrease first, then increase.Macroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.Question 4 Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.75Yd and generates $2200 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)
- 16. Suppose that planned investment and planned government purchases do not depend on income:I = 15 and G = 17. Consumption, as you would expect, does depend on income via the consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12. Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best description of this situation? a. the (Y, AE) point is above the 45 degree line, Y will adjust down b. the (Y, AE) point is above the 45 degree line, Y will adjust up c. the (Y, AE) point is below the 45 degree line, Y will adjust down d. the (Y, AE) point is below the 45 degree line, Y will adjust up 17. (continued) Help you friend by calculating the equilibrium income for the AE model in the previous question. Y = _____9)Calculate how much output would expand by if the government increased spending by $500 billion and financed this spending by increasing lump-sum taxes by the same amount.Only typed answer Assume that marginal propensity to consume is 0.8 and full-employment level of output is $800 billion. If the actual real GDP is $700 billion, find the change in lump-sum taxes that would bring the economy back to its full-employment level of output (assume taxes and transfer payments do not depend on income and the economy is a closed economy).
- Suppose that the government of Uplandia is experiencing a large budget deficit with fixed government expenditures of G=375 and fixed taxes of T= 225. Assume that consumers of Uplandia behave as described in the following consumption function C = 450 + 0.96 (Y - T). Suppose further that investment spending is fixed at 300. a. Calculate the equilibrium level of GDP in Uplandia. Solve for equilibrium levels of Y, C, and S. b. Next, assume that the National Congress in Uplandia succeeds in reducing taxes by 89 to a new fixed level of 136. Recalculate the equilibrium level of GDP using the tax multiplier c. Solve for equilibrium levels of Y, C, and S after the tax cut and check to ensure that the multiplier worked.ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .34.With the additional leakages of imports and taxes in additional to savings in a public, open economy, how is the economy still able to reach equilibrium? 35.Compare and contrast the recessionary expenditure gap and the inflationary expenditure gap. 36.If there is a recessionary expenditure gap of $100 billion and the MPC is 0.80, by how much must taxes be reduced to eliminate the recessionary expenditure gap?