Assume the MPC is 0.80. If government were to impose $200 billion of new taxes on household income, consumption spending would initially decrease by $200 billion. $160 billion. $80 $40

Q: suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075.…

A: To calculate increase in government spending we have to first calculate the spending multiplier.

Q: The aggregate consumption function is C=1,000 + 0.9Yd. If income is $3,600 and net taxes are $600,…

A: Given: C=1000+0.9YdY=3600t=600

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: If the MPC is 0.7 and investment increases by $4 billion, the equilibrium GDP will Multiple Cholce…

A: Aggregate demand refers is the overall demand for goods and services in an economy. The aggregate…

Q: Analyse the effect on equilibrium national income if the MPC falls from 0.95 to 0.4. Illustrate with…

A: National income is an income that is generated by summing the consumption, government expenditure,…

Q: Assume the MPC is 0.8. If government were to impose $20 billion of new taxes on household income,…

A: Given MPC = 0.8 New taxes imposed = $20 billion

Q: If the MPC is 0.5, the tax multiplier is Select one: a. -1 b. -2.5 C. -1.67 d. -2

A: Tax Multiplier:- The tax multiplier is a metric that evaluate how much a tax reform affects…

Q: The tax multiplier is the MPC multiplied by the MPS. the ratio of the change in taxes to the 2…

A: Answer: Correct option: 3 (the ratio of the change in the equilibrium level of output to the change…

Q: Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government aims to increase…

A: Gross domestic product (GDP) is the standard measure of the value added created through the…

Q: Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the…

A:

Q: If MPC = .5, a simultaneous increase in both taxes and worthless government spending of $20 will:…

A: The balanced-budget multiplier is equal to 1 in this case . When the government increases spending…

Q: Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making…

A: If MPC=0.8 then  MPS=1-MPC MPS=1-0.8 MPS=0.2

Q: Given the national income model Y=C+I+G. C=400+0.72Y; I=100 and G=90 a) Obtain the equilibrium…

A: The national income in a closed economy can be calculated as the sum of consumption spending,…

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: Suppose that autonomous consumption (a) is 300, private investment spending(I) is 420, government…

A: In the Keynesian model, the aggregate expenditures or national income can be determined by using the…

Q: What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the…

A: (1)  Before-tax: Before-tax, GDP and Disposable income (DI) are the same.  As we can see, every 100…

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: 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: Given that G= 20 1= 35 C = 0.9Ya + 70 T= 0.2Y + 25 Where, G, I, C, T and Ya are planned government…

A: Aggregate expenditure is the sum of consumption spending, investment spending and government…

Q: If the MPC is 0.8 and government spending decreases by $50 million, then equilibrium GDP will…

A: The equilibrium GDP:The equilibrium GDP can be calculated as follows:

Q: Given a full employment level of GDP of 700 Trillion and a current level of 750 Trillion and an MPC…

A: The economy is said to be in the full employment level of GDP at the level of 700 trillion whereas…

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: Equilibrium output is 1000, MPC is 1/2 and taxes are zero. Government spending is 20 and net exports…

A: The income equation is given as Y = C+I+G+NX Here consumption is 1/2*Y= MPC which is 1/2*1000= 500…

Q: If the autonomous expenditure by the government increases by 7000 and the MPC is 0.2 find the level…

A:

Q: Given a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to…

A: MPC=0.75 Decrease in consumer spending=$300

Q: Suppose autonomous government spending increases by $100 billion and the value of the MPC is 0.6.…

A: Formula:  Multiplier = 1/(1-MPC)  Calculate multiplier as follows:  Multiplier = 1/(1-MPC)  =…

Q: Since March 2020 (after the breakdown of Covid19) it is observed that people started to save more…

A: Given; Initial marginal propensity to save; MPS= 0.30 New Marginal propensity to save; MPS= 0.45…

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: Suppose the MPC in an economy is 0.95. What should the government do with taxes if they want to…

A: The magnitude of change in income due to change in autonomous spending is known as multiplier. The…

Q: Assume an MPC of 0.9. The change in total spending for the economy as a result of a $100 billion new…

A: Income is divided between consumption and saving. If MPC is 0.9. This means people of the economy…

Q: (Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with…

A: Multiplier = 1 / (1- MPC) When government purchases decreases by $10 billion, For MPC = 0.9 Real GDP…

Q: What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary?…

A: The marginal propensity to consume (MPC) measures the change in the consumption spending of…

Q: the MPC is

A: MPC means marginal propensity to consume. MPC refers to proportion of additional unit of income…

Q: GDP, Billions Consumption, Billions $100 $120 200 200 300 280 400 360 500 440 600 520 700 600 c. Now…

A: Given the proportional tax = 10% We are required to find the new consumption schedule, MPC, and…

Q: Instructions: Round your responses to two decimal places. If taxes were cut by $1 trillion and the…

A: Marginal Propensity to Consume refers to the proportion of income that consumers consume instead of…

Q: Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will…

A: Y= $32000 C= 5000 + (MPC)Y I= 1500 G= 2000 NX= -500 Equilibrium level of output; Y= C+I+G+NX

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: Assume that in the economy of Utrea, the MPC is 0.8 and the multiplier is 3 and that both government…

A: The gross domestic product (GDP) is the money value of all the newly produced goods and services in…

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: If the MPS were equal to 0.75, the expenditure multiplier would be * a. Less than zero b. zero c.…

A: Given: MPS=0.75 To find: Expenditure multiplier

Q: MPC is 0.875. When tax increases by $1, GDP will decrease by $8. by $1, GDP will decrease by $7. by…

A: MPC = 0.875 Using the Tax multiplier formula

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: As shown in Exhibit 2, dissaving occurs:   Group of answer choices at $5 trillion. between 0 and $4…

A: The 45° line is the GDP or the total output line.  Savings is the portion of income that is not…

Q: In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and…

A: Given the MPC = 0.90 Reduction in consumption = $5 billion Decrease in investment  = $4 billion

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

A: The use of government spending and tax policies to influence economic conditions, especially…

Q: if the MPC in an economy is .80 government could shift the aggregate demand curve leftward by $48…

A: Answer: Correct option: (A) increasing taxes by $12 billion Explanation: If the government increases…

Q: Suppose the government reduces taxes by $20 billion and that there is no crowding-out effect and the…

A: Answer to the question is as follows :

Q: Suppose the president is successful in passing a $10 billion tax increase. Assume that taxes are…

A: Tax multiplier is a fiscal multiplier which measures the multiples of change in gross domestic…

Q: Suppose the MPC is 0.85. If government purchases increase by $10 billion and net taxes fall by $10…

A: MPC = 0.85 --------------------- Government spending multiplier = 1 / (1-MPC) => Government…