Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession. Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers as a whole number. a. By how much would government spending have to rise to shift the aggregate expenditures schedule by $25 billion? | billion How large a tax cut would be needed to achieve the same increase in aggregate expenditures? Tax cut = $ billion

Q: Consider a hypothetical closed economy in which households spend $0.60 of each additional dollar…

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

Q: Which of the following measures will enable the government to close a contractionary gap of -20,000…

A: Consumption analysis serves as a yardstick for assessing how scarce resources are used, the reason…

Q: marginal propensity to consume (MPC) is 0.8. The following graph shows the aggregate demand curves…

A: Answer in step 2.

Q: Assume that equilibrium real GDP is $ 800 billion, potential real GDP is $ 950 billion, the MPC is…

A: “Hey, since there are multiple subpart questions posted, we will answer first three subpart. If you…

Q: Suppose the economy is in recession. Policymakers estimate that aggregate demand is $100 billion…

A: Multiplier is equal to 1/(1-MPC), where MPC is the marginal propensity to consume. Multiplier =…

Q: In each of the following cases, calculate the spending multiplier and determine the size and shift…

A: As requested, answering (c) and (d) (c) Multiplier = 1/ MPW  = 1/ 0.35 = 2.857   AD decreases by =…

Q: Suppose MPC equals 0.9, government taxes 30% of all incomes, and the marginal propensity to import…

A: here we calculate the change in G, by using the relevant given information , so the calculation as…

Q: One possible fiscal policy solution for a recessionary gap would be O to cut taxes. O to raise…

A: Fiscal policy is a policy used by the government to stabilize the economy from economic ups and down…

Q: The economy of country B is characterized by the following: • Aggregate output: Y • Investment…

A: According to the national income identity, gross domestic product is calculated by adding consumer…

Q: 1. Suppose the MPC is .90 and the MPI is .10. if government expenditure goes up $100 billion while…

A: Given Information: for ecercise 1 MPC = 0.90 MPI = 0.10 government expenditure goes up $100 taxes…

Q: Income is 678 Trillion and consumption is 662 Trillion then income increases to 698 Trillion and…

A: Marginal propensity to consume (MPC) refers to the level of additional consumption expenditure due…

Q: Assume that, without taxes, the consumption schedule for an economy is as shown in the first two…

A: Please find the attached calculation below-

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.…

A: Given information: mpc = 0.8   * Government spending multiplier: ∆Y∆G = 11-mpc   * Tax multiplier:…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: The marginal propensity to consumer (MPC) refers to the change in the change in the consumption…

Q: on basis of the following information. Assume that equilibrium real GDP is $800 billion, potential…

A: Since equilibrium GDP < potential GDP, there is a recessionary gap of (950 - 850) = $150 billion.…

Q: By how much would government spending have to rise to shift the aggregate demand curve rightward by…

A:

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: How much government spending needs to be increased by to maintain full employment in the economy If…

A: *Answer:

Q: Assume a contradictory gap of $4 trillion. With MPC equal to 0.75, what would be the recommended…

A: With the contractionary gap in the economy, the fiscal policy which can be adopted in the economy is…

Q: 2. Fill in the blank in the following statement. (Show your calculations). If government spending is…

A: Output in equilibrium: It is the amount of output in an economy when the aggregate demand equals the…

Q: How much government spending needs to be increased to maintain full employment in the economy if the…

A: Recessionary gap It is the situation when Actual GDP is less than Potential GDP. In order to fill…

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75  Tax multiplier = (-MPC/1-MPC) Tax multiplier= (-0.75/1-0.75)Tax multiplier=…

Q: An economy is operating with an output that is $400 billion dollars below its natural rate of $2000…

A: The economy’s current level of output is $1,600 billion (2,000 - $400) and the economy’s potential…

Q: What happens to aggregate output if both taxes and government spending are lowered by $300 billion…

A: A multiplier is a proportionality factor that measures how much endogenous variable changes in…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: Given data: MPC is 0.80 Expenditure gap is $80 billion

Q: In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the…

A: Gross domestic product (GDP) refers to the value of all final good and services that produced within…

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession Instructions:…

A: In economics, the marginal propensity to consume is a metric that quantifies induced consumption,…

Q: For this question, assume AE = 900 + 0.75Y and the full-emloyment level of income is 4000. What is…

A: Recessionary gap is the gap between the level of real GDP and potential output, when the real GDP is…

Q: Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal…

A: Initially, due to the tax cut of 50,000,000 the spendings of people rose by the MPC (given as 0.9).…

Q: If the MPS in an economy is 0.43, government could shift the aggregate demand curve rightward by $40…

A: MPS is the proportion of increase in income that goes into saving i.e. MPS = ΔS/ΔY We are given MPS…

Q: Suppose there are both multiplier and crowding out effects but without any accelerator effects. An…

A: Components of aggregate demand in a closed economy include consumption, investment and government…

Q: Due to COVID-19 Pandemic, the economy of Finland is in a recession. The government is planning to…

A: Increased government spending is part of expansionary fiscal policy.

Q: Assume that equilibrium real GDP is $ 800 billion, potential real GDP is $ 950 billion, the MPC is…

A: (a)   Tax multiplier can be calculated as follows.

Q: How much government spending needs to be increased to maintain full employment in the economy If the…

A: Answer: Given: Recessionary Gap=$900MPC=0.9 Calculation: To calculate the government expenditure…

Q: If MPC in an economy is 0.71 and government spending increases by 1,274, what will overall GDP…

A: We will answer the first question since the exact one was not specified. Please submit a new…

Q: The recent economic recession was brought about by the Covid-19 pandemic. The pandemic brought along…

A: The recent economic recession which was brought about by the Covid-19 pandemic has been responsible…

Q: Mexico's real GDP fell from 4.5 trillion pesos to 3.8 trillion pesos over the first part of 2020. In…

A: To get the tax cut multiplier: Decrease in real GDP or it also represents disposable income =…

Q: Refer to the table on the next page in answering the questions that follow:a. If full employment in…

A: a) If the full employment is at 130 million of employment, the full-employment GDP is $700 billion.…

Q: Please answer fast

A: Given, Autonomous consumer spending = $200 billion. Autonomous investment spending = $100 billion.…

Q: Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its…

A: As a fiscal policy measure The government either increase government purchases/spending or decreases…

Q: If government purchases increase by $20 billion and aggregate demand shifts rightward by $30 billion…

A: the MPC for this economy is 0.33

Q: The federal government implements an expansionary fiscal policy of increased spending and decreased…

A: Fiscal policy delineates the efforts put by the federal government to control and regulate the…

Q: Suppose MPS=0.68 and MPI=0.17 19. What is the spending multiplier? 20. What is the level of real GDP…

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