please solve parts c and d 5. Suppose Bard is its own macroeconomy functioning at full employment. Themarginal propensity to consume at Bard is 0.5. Autonomous consumption at Bardis $200. Government spending is $100. Intended investment is $100.a) Calculate the spending multiplier at Bard. Calculate the tax multiplier.Why is the tax multiplier small than the spending multiplier?0001b) Calculate and show graphically equilibrium output and income atBard c) Suppose a crisis in consumer confidence decreases autonomousconsumption to $100. Show graphically and calculate new output andincome.d) What size and type (be specific) of policy would bring the economyback to full-employment output?

Full employment level is achieved where LRAS=AD = SRAS . beyond the level of Full employment output…

c) Suppose a crisis in consumer confidence decreases autonomous consumption to $100. Show graphically and calculate new output and income. d) What size and type (be specific) of policy would bring the economy back to full-employment output?

c) Suppose a crisis in consumer confidence decreases autonomous consumption to $100. Show graphically and calculate new output and income. d) What size and type (be specific) of policy would bring the economy back to full-employment output?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 20SQ

See similar textbooks

Related questions

Q: Stock Market Prices: Demand and supply in Action Firms that are quoted on the stock market can raise…

A: A stock market, sometimes also known as an equity market or a share market, is a place where buyers…

Q: QUESTION 14 When there is a technological advance in the cheese industry, consumer surplus in that…

A: Q14) "Consumer surplus reflects the difference between the buyer's willingness to pay and the market…

Q: Draw a downward-sloping demand curve for labor and an upward-sloping supply curve of labor in a…

A: Labour demand and labour supply curve are very significant in the determination of real wage rate .…

Q: Question 4: ( Suppose an economy is in its steady state with k° = 49.38. Imagine it has the…

A: Introduction Given economy is in steady state. Let production function: Y = L1/2 K1/2 Now divide the…

Q: Davao International Airport has crafted estimates for the upgradıng of security systems. Will the…

A: Given that; Interest rate= 10%

Q: Industrialization should start from a sound agricultural base. Why? What could be a contribution of…

A: Industrialization should begin with a strong agricultural foundation since it allows fewer farmers…

Q: An individual has a utility function, U(q,,42) = Jq1•92). (Mathematical assistance: x = x2). Derive…

Q: 1. What happens to the demand curve for labor in the following situations: a) On factory workers:…

A: When demand increases, the demand curve shifts to the right, and when demand decreases, the demand…

Q: 5. Suppose food (F) and clothing (C) are produced using only labor. The production functions are…

A: In economics, a production function refers to an equation that represents the connection between the…

Q: Macroeconomists would suggest that an economy experiencing high unemployment should adopt policies…

A: Macroeconomists deals with national issues like unemployment, GDP and Inflation

Q: QUESTION 21 A decrease in price will increase consumer welfare or consumer surplus due to a. New…

A: Q21) "A decrease in price increases the consumer surplus."

Q: QUESTION 1 When a product becomes more fashionable, what does happen in the market? a. Total surplus…

A: Q1.) "Total surplus is the sum of producer surplus and consumer surplus."

Q: QUESTION 22 The total surplus in a market reaches its maximum when supply and demand are in…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: If the price is set to P1, what area represents the producer surplus in the graph shown above? D B +…

A: Producer surplus refers to the total amount of money earned by a producer that is above the minimum…

Q: Question 9 A firm has a cost function cL, K) = wL + rK with a production function pL,K) = AL“ K® .…

A: Lagrange approach is used to minimise or maximise a function subject to a constraint

Q: The price-demand equation, D(x), and the price-supply equation, S(x), of a Slow Cooker are given…

A: Since you have posted a question with multiple subpart, we will solve first three subpart for you.…

Q: Total Revenue Change in profit (£) Total Marginal Output (Units) Profit Marginal cost (£) cost (£)…

A: Marginal revenue is the additional revenue earned by selling an additional unit of output. Marginal…

Q: Imagine a hypothetical consumer is using all of their income on two goods, X and Y. The price of…

A: Given Price of good X =$2 Price of good Y= $10 Additional units of utility from another unit of…

Q: A competitive firm maximizes profit when marginal cost: a. equals the price. b. is less than the…

A: There are many firms offering the same identical products in a market system with perfect…

Q: 1. An individual has a utility function, U(q,42) = /91 q2). %3D (Mathematical assistance: x = : (a)…

A: We have given utility function U = (q1q2)1/2 where p1 and p2 are prices of q1 and q2.

Q: What happens to either the supply or demand curves for labor in the following situations: a) On…

A: Disclaimer :- As you posted multipart question we are supposed to solve the first 3 parts only as…

Q: 2P + 4M = 200 se that people prefer to eat two potatoes with every pound of mea of each product will…

A: In economic matters and other sociologies, preference is the demand that a specialist provides for…

Q: Accounting profits are: A.) economic profit less explicit costs. B.) less than economic…

A: "There are two kinds of costs explicit costs (are out of the pocket costs for a firm) and implicit…

Q: Enumerate at least 5 occupations/job that is consider as part of Labor Shortage. Discuss briefly…

A: The concept that depicts the insufficient candidates for employment in a number of industries in an…

Q: 6. What is role of the government and economic policy during recessions according to Classical…

A: The numerous macroeconomic theories and models of how aggregate demand greatly impacts economic…

Q: ompute the number of periods in order that the capital recovery factor for a uniform payment series…

A: A/P = 0.1424564 r = 6% compounded semianually

Q: 30 25 20 15 10- 1 3 5 6. 8. Labor 10- 4) 2. Marginal Product

A: Marginal product refers to change in total product with respect to change in input. It refers to…

Q: If the social costs of an economic activity are $120 and the private costs are $75. then the…

A: Given: Social Costs = $120 Private Cost = $75

Q: What is leverage ratio and how its applied to Auto Industry?

A: A leverage ratio refers to one of numerous financial metrics that examines how much money originates…

Q: A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea…

A: Elasticity measures the responsiveness of quantity demanded to change in prices.

Q: War Street Journal in 2021 observed, "And, while bitcoin is referred to as a digital currency. it…

A: Digital money is a type of cash that is accessible just in computerized or electronic structure. It…

Q: B. Use the data in the table below to calculate the opportunity cost of moving from production point…

A: Opportunity cost refers to loss that occurs due to giving up the next best alternative while making…

Q: Q. Suppose the exchange rate between the Malaysian ringgit and British Pound is: RM 5.4860/ £.…

A: The rate that depicts the rate at which one currency is measured in terms of another currency in…

Q: Nursing Should public funding be used for prevention programs if money could be saved in the future?

A: Being a part of system-wide efforts to focus on what works best is what prevention entails. This…

Q: Suppose the economy is initially in its long-run equilibrium. Due to the biased (overestimated)…

A: IS-LM model shows money market equilibrium and goods market equilibrium at various levels of…

Q: After World War II, Germany was the only participating country left with its infrastructure intact…

A: The World War II had a significant impact on various participating countries as it resulted in a…

Q: An economy produces three products, bags, computers and shirts. The prices and quantities of these…

A: GDP measures the market value of final goods and services produced by an economy during a given…

Q: The following estimates (in $1000 units) have been developed for a security system upgrade at…

A: Benefit cost ratio shows the relation among relative cost and the benefit or advantage of the…

Q: 45. Use the graph to answer the question that follows. Which of the following can cause the…

A: Answer is given below

Q: Q1) Consider the following information for product A and related product B in consumption: Quantity…

A: Formula to calculate price elasticity:- Ed=Change in quantity demandedAverage of quantity of AChange…

Q: Bob's lawn mowing service is a profit maximizing, competitive firm. Bob mows lawns for $27 each. His…

A: Total cost is the sum of Fixed cost and variable cost. Fixed cost remains same at all levels of…

Q: Assume that Peter's short run Total Cost Curve is TC = 20,000q- 200q² +q*. Calculate his (short run)…

A: Average total cost is total cost divided by quantity. ATC = TC / q => ATC = (20,000q - 200q2 +…

Q: 1. An individual has a utility function, U(q,,92) = J91 92). (Mathematical assistance: Vx = (a)…

A: We have cobb Douglas utility function whith given price p1 and p2.

Q: How would the creation of an import quota affect the market for a good? Imported supply increases…

A: Import quota puts restrictions on quantity that can be imported.

Q: The government can achieve permanent higher growth rates by having two determinants of growth. The…

A: There are two determinants that can achieve permanent and higher economic growth. Capital…

Q: Jimmy just graduated from a top medical school and is currently deciding which hospital emergency…

A: Unemployment refers to the state in which a person does not have any job even though he is actively…

Q: ) What is the Service Corps of Retired Executives (SCORE)? How does it assist small-business owners?…

A: The Service Corps of Retired Executives (SCORE) refers to a non-profit organization whose members…

Question

please solve parts c and d

5. Suppose Bard is its own macroeconomy functioning at full employment. The
marginal propensity to consume at Bard is 0.5. Autonomous consumption at Bard
is $200. Government spending is $100. Intended investment is $100.
a) Calculate the spending multiplier at Bard. Calculate the tax multiplier.
Why is the tax multiplier small than the spending multiplier?
0001
b) Calculate and show graphically equilibrium output and income at
Bard

c) Suppose a crisis in consumer confidence decreases autonomous
consumption to $100. Show graphically and calculate new output and
income.
d) What size and type (be specific) of policy would bring the economy
back to full-employment output?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Q1. Consumption is given by C-100+0.8YD and 1-50. The fiscal policy is summarized by G-200, TR 62.5 and t 0.25 a) what is the equilibrium level of income? what is the value of the new multiplier? Why is this less than the multiplier in the earlier problem? b) what is the value of the budget surplus(BS) when1=507? What is BS when investment increases to 1007? .C) Assuming that the full employment level of income Y-1200, what is the full employment BS* when I=50
If the Marginal Propensity to Consume (MPC) is .90, estimate the total (multiplied) effect of government purchases/spending of $100B in the economy in terms of its aggregate expenditure (Hint: Multiplier = 1 / 1 – MPC). Calculate the net cumulative change in aggregate expenditure if taxes were cut by $200 billion and MPC is estimated to be .75. What if government expenditure was increased by $200 billion? (Hint: Total change in expenditure = multiplier x new expenditure or spending injection)
84 please quickly thanks ! In a model with demand-determined output and a constant price level, a decrease in the net tax rate causes _____ in autonomous spending and a _____ in the simple multiplier. a.No change; fall. b.A fall; fall. c.A rise; rise. d.No change; rise. e.A rise; fall
1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities:a. Government expenditures at the equilibrium level of income if T = $160 and I = $100.b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier?c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending multiplier?d. Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
Please check the solution to (a) and (b) of the following problem for accuracy and elaborate: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary fiscal policy as (a) cutting taxes by $10 billion, then by how much would total spending increase over an infinite period? (b) spending $10 billion, then by how much would total spending increase over an infinite period? MPC = 0.75 Tax multiplier = (-MPC / 1) = (-0.75 / 1 – 0.75) = (-0.75 / 0.25) = -3. (a) Cutting taxes by $10 billion. The total spending increase by (-3) (-$10 billion) = $30 billion. Spending multiplier = (1/1 – MPC) = (1 / 1 – 0.75) = 1 / 0.25 = 4 (b) Spending 1ncrease by 10 billion. The total spending increase by (4) ($10 billion) = $40 billion.
Consider a closed economy with fixed prices and wages. Suppose consumption function takes the form C = 150+0,8Yd, Investments are I = 200, government purchases are G = 350, tax rate t= 0,1. There are no lump-sum taxes. (some calculations are added in the images) 1)Compute the government spending multiplier before and after changes in tax rate. Explain why multiplier is changed? 2) If the potential output is 3000 and economy is in initial equilibrium (a) what changes in government purchases the Government need to implement in order to achieve potential output? Show how changes in government purchases affect the planned aggregate spending line and new equilibrium output.
11. If the marginal propensity to consume is 0.5, the tax multiplier is:(A) -2.5. (B) -2 (C) -1 (D) -1.666
Suppose that the government of Ansonia is experiencing a large budget deficit with fixed government expenditures of G=250 and fixed taxes of T=150. Assume that consumers of Ansonia behave as described in the following consumption function: C=300+0.8(Y−T) Suppose further that investment spending is fixed at 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Next, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 120. Recalculate the equilibrium level of GDP using the tax multiplier. Solve for equilibrium levels of Y, C, and S after the tax cut and check to ensure that the multiplier worked. What arguments are likely to be used in support of such a tax cut? What arguments might be used to oppose such a tax cut? Thank you sososooo much!
Consider an economy described by the following equations: C = 300 + 0.90 (Y – T) (Consumption) I = $200 (Investment) G = $300 (Government spending) T = $200 (Taxes) Determine the equilibrium level of national income. Suppose government spending increases to $400. What is the new level of income? What is the government spending multiplier? Suppose taxes increase to $300. What is the new level of income? What is the government tax multiplier? Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by $100 billion. Calculate how much the government would have to spend to achieve this objective. Define the tax multiplier and give the algebraic expression. Assume that the government spending multiplier is equal to 4. Calculate the tax multiplier from this information. 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
1) Assume that Canadian government taxes away $0.15 of each dollar of new income, that 35% of the remaining $0.85 of disposable income is spent on imports, and that 2% of disposable income is saved. Enter your responses below rounded to 2 decimal places. a. The marginal propensity to withdraw is . b. From each new dollar of income $ is spent on domestic consumption items.c. The value of the Canadian spending multiplier is . 2) In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers. a. If government purchases increase by $3 billion in an economy with an MPW of 0.65 then the spending multiplier is and the AD curve finally shifts to the by $…