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 demand curve rightward by $25 billion? billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut = $ billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spending by $ billion Increase taxes by $ billion

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 demand curve rightward by $25 billion? billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut = $ billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spending by $ billion Increase taxes by $ billion

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 20SQ

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Assume that a hypothetical economy with an MPC of 0.75 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? $ billion. How large a tax cut would be needed to achieve the same increase in aggregate demand? $ billion. b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (because it maintains a balanced budget, G = T). Increase spending by $ billion. Increase taxes by $ billion.
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter your answers as positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $30 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (i.e., maintaining the budget balance at its current value).
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter your answers as positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion?
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. Fiscal Policy Instructions: Enter your answer as a whole number. If you are entering a negatlve number Include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrilum? $, billion b. If the MPC is 0.6 , how much do taxes need to change to shift aggregate demand by the amount you found in part a? $, billion Suppose Instead that the MPC is 0.8 . c. How much does aggregate demand and taxes need to change to restore the economy to Its long-run equilibrlum? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. A) By how much would government spending have to rise to shift the aggreagte demand curve rightward by $ 25 billion? How large a tax cut would be needed to achieve the same increase in aghregate demand? Instructions: Round your answer to 2 decimal places and enter your answer as a positive number. Tax cut= ? (billion) B) Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spending by (?) billion. Increase taxes by (?) billion.
Assume that a hypothetical economy with an MPC of 0.9 is experiencing severe recession. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. increase spend by increase tax by
Suppose that there are no crowding out effects and the MPC is .7. By how much must the government increase expenditures to shift the aggregate demand curve right by $10 billion?
Could you do C and D In each of the following cases, calculate the spending multiplier and determine the size and shift of each fiscal policy on the AD (aggregate demand) curve. a. Government increases spending by $4 billion in an economy with a MPW of 0.7b. Government spending decreases by $2 billion in an economy with a MPC of 0.65.c. Government increases taxes by $3 billion in an economy with a MPW of 0.35d. A $5 billion tax cut causes an initial increase in spending of $1.5 billion.
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