(Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion. 0.9 0.8 0.75 0.6

(Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion. 0.9 0.8 0.75 0.6

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Tracking The U.s. Economy

Section: Chapter Questions

Problem 3.7P

See similar textbooks

Similar questions

16- Which one of these will be deducted from gross output to determine the net output? a. Intermediate consumption b. Private income c. Factor income from abroad d. Total government spending
1 ) Changes in business inventories are: classified as government purchases. classified as consumption expenditures. classified as investment expenditures. excluded from GDP.
21- The purchase of a new car falls under which of the following types of expenditure? A) C B) M C) G D) X E) I
(11) The fiscal balance is the difference between exports and imports. government expenditure and revenue. production and consumption. savings and investment. lending and borrowing. (12) What is the effect of a fall in domestic savings on the rate of interest and the level of investment? Neither the interest rate nor the level of investment change. The interest rate rises and the level of investment falls. The interest rate and the level of investment both fall. The interest rate and the level of investment both rise. The interest rate falls and the level of investment rises. (13) The real exchange rate is defined as the amount of (local, foreign) (currency, products) required to exchange for a given amount of (local, foreign) (currency, products). local currency; foreign currency. foreign currency; local currency. local products; foreign currency. local products; foreign products. local currency; foreign products. (10) Over the last two decades, nominal salaries in Jamaica…
The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected: Year Aircraft Sales Average Price Disposable Constant Income (Dollars) (In constant 2006 dollars, billions) 2006 525 16,800 610 2007 450 8,000 610 2008 400 8,000 580 The arc price elasticity of demand between 2006 and 2007 is: The arc income elasticity of demand between 2007 and 2008 is: Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc…
21) Assume that with existing tax and spending laws, government spending exceeds government tax revenues. To cover the resulting shortfall, the government must: A) increase consumers' incomes. B) print more money. C) Borrow money in the financial markets. D) lower interest rates. 22) Gross Domestic Product (GDP) is defined as the market value of: A) all goods and services sold during the year by domestic and foreign producers. B) all final consumer goods produced during the year by domestic and foreign suppliers. C) all intermediate goods produced during the year by domestic and foreign suppliers. D) all final goods and services produced within the boundaries of an economy during the year by domestic and foreign-supplied resources. 23) In the equation GDP = C + I + G + F, in which F equals net export spending (i.e., total spending on exports minus total spending on imports), imports are subtracted from the other types of expenditures because: A)…
5) What factors will shift the aggregate demand curve for a given level of real domestic income?
Write 3 difference between revenue expenditure and capital expenditure
8- A person’s disposable income decreases, and his personal income remains unchanged. This is because of ______. a. Decreased personal taxes b. Increased personal taxes c. Increased corporate taxes d. Unemployment reasons
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).
7 Suppose that the government increases its expenditure on goods and services by $100 billion and pays for these goods and services by raising autonomous taxes by $100 billion. What is the effect on aggregate demand and real GDP of each change individually and of the two combined
8. Referring to Fig 4b and the attached table, what is remarkable about the shares of federal individual income taxes paid by the bottom 40% of households by income, since 2002? a) The share of federal individual income taxes paid by the bottom 40% have not changed much. b) The share of federal individual income taxes paid by the bottom 40% have been increasing. c) The share of federal individual income taxes paid by the bottom 40% have been decreasing. d) The share of federal individual income taxes paid by the bottom 40% have turned negative. 9. Referring to Fig 4b, the attached table, and your answers to questions 7 and 8 above, is it reasonable to infer that income tax rate cuts tend to increase the share of taxes paid by top income taxpayers? YES NO 10. in 1979, the share of federal individual income taxes paid by the bottom 80% of taxpayers by income is ______%. 11. In 2007, the share of federal individual…