An increase in mpc in the Keynesian income expenditure model leads to a. a change of the slope of aggregate demand (expenditure) Curve o. a weaker goods market multiply efficiency c. a shift of the aggregate demand (expenditure) curve d. increase in the price level
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- If the recessionary gap is $ 200 billion and the multiplier is 2, what is the increase in aggregate spending needed to bring the economy to full employment? a)$300 billion b)$ 600 billion c)$200 billion d) $66.6 billionThe Expenditure multiplier occurs because A. a change in autonomous expensitures changes household incomes B) a change in autonomous expensitures causes real GDP to change in the opposite dirrection C) a change in households incomes changes autonomous expensitures D) any change in real GDP must also change the price level E) goverment expenditure on goods and services change by a proportional amount to government taxes(a)Elaborate THREE (3) determinants in which consumption can be increased according to the consumption function. (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.
- The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let's say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes to close the recessionary gap. How much will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let's say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume the MPC equals .80. How much will the tax increase be? The government wants to achieve a balanced budget. It therefore increases…Determine the change in the equilibrium level of consumption (find ΔC) following a decrease in government spending from 400 to 300 (ΔG = -$100). A: positive 400$ B: negative 300 c: negative 400 D: positive 300In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y − T). Planned investment is 100; government purchases and taxes are both 100. (solve three tasks) Graph planned expenditure as a function of income. What is the equilibrium level of income? If government purchases increase to 125, what is the new equilibrium income?
- 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 clearlyShow all formulas and all work Given: Rufull employment = 2% Ru = 4% Potential GDP= $12,000 billion MPC = ¾ = .75 Find the multiplier Find GDPGAP% and then the GDPGAP Find the Recessionary Expenditure GAP Find the Government Spending that could close the GDPGAP Find the Tax change that could close the GDPGAP Find the amount of spending necessary to close the GDPGAP under a Balanced Budget spending program.The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It, therefore,…
- 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.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).Cons Consider a closed economy with the following Consumption function C= 15+ 0.75 (Y-T), where C is consumption, Y is income, and T is taxes. If government spending is G= 20, investment is I= 70 and taxes are T=40, find the equilibrium level of output. c) i. Explain the accelerator theory of investment. ii. Outline any limitations of the above theory
