Consider the Keynesian Cross model. If the fiscal multiplier equals 2, and the government decides to increase government purchases by 100, by how much would equilibrium output increase?

Q: In the IS/LM model, the fiscal policy multiplier with respect to interest rates is (α corresponds to…

A: The correct answer is given in the second step.

Q: Which of the following illustrates the effectiveness lag? A.Policymakers implement contractionary…

A: Effectiveness lag can be understood as when the policy is implemented or any change in policy is…

Q: Explain and show the consequence for fiscal policy if the marginal propensity to consume is a…

A: Fiscal policies are the public authority made approaches made to control, fortify and support the…

Q: The change in aggregate demand that results from fiscal expansion changing the interest rate is…

A: Crowding out Effect states that government spending is increased in order to balance the reduction…

Q: Consider a Keynesian model but where investment (just like consumption) is increasing in aggregate…

A: MPI refers to marginal propensity to invest. This is the amount of change in investment with respect…

Q: Refer to the figure above. If the economy is at point b, to close the output gap the appropriate…

A: When the economy is at point B, the gap is inflationary gap. The actual output is higher than…

Q: Suppose the multiplier for a given fiscal policy package is estimated to be 0. Given this estimate,…

A: The fiscal multiplier calculates the effect of a fiscal stimulus on an economy's Gross Domestic…

Q: According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the…

A: Spending multiplier measures the rate of change in national income arising from a change in…

Q: Explain how the conduct of fiscal policy affects consumption and investment in equilibrium.

A: Fiscal policy is a macroeconomic policy that is implemented by the government for monitoring and…

Q: Consider an economy described by the following equations:   C = 300 + 0.90 (Y – T)…

A: Government spending multiplier = 1 / 1 - MPC Government spending multiplier = - MPC / 1 - MPC

Q: If the marginal propensity to consume is 0.2 and the government increases its spending by ¥1…

A: Marginal propensity to consume is 0.2 => MPC = 0.2 ----------------- Spending multiplier = 1 / (1…

Q: Which of the following is an example of an automatic stabilizer? Congress legislates lower tax rates…

A: Automatic stabilizer are such policy tools that automatically adjust as per the need and situation…

Q: Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model.…

A: Government spending multiplier = 1 / (1 - MPC) Tax multiplier = MPC / (1-MPC)

Q: If the Keynesian consumption function were C = 2,000 + 0.75YD , what would the value of the tax…

A: Consumption function is the sum of autonomous and induced consumption. The slope of the Consumption…

Q: If the propensity to consume decreases from 95% to 80%, then Fiscal stimulus multiplier does what?…

A: Fiscal stimulus Multiplier, is also known as the Government expenditure multiplier and is given by…

Q: Show and explain how an expansionary fiscal policy can cause crowding-out effect by using aggregate…

A: With expansion of fiscal policy is the policy used to boost the economy through increase in the…

Q: If the marginal propensity to consume is equal to 0.8, and the government injects $50,000,000 of…

A: Given  MPC = 0.8 Government injected $50,000,000

Q: According to the classical macroeconomic model, expansionary fiscal policy has an inflationary…

A: Fiscal Policy is a policy by which the governments adjusts its amount of expenditure and taxes…

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

A: ‘Real GDP’ is a macroeconomic metric that measures the value of an economy's goods and services over…

Q: Keynesians believe that the multiplier effect of an increase in government spending will be that of…

A: Answer to the last two parts are given:

Q: Refer to the above graph. Assume that the economy is in a recession with a price level of P2 and…

A: the aggregate demand is the total  number of goods and services svgjslly form crowd out.

Q: Comparing the simple Keynesian model with the IS-LM model, in the IS-LM model   a. the balanced…

A: the entire government spending increase goes towards increasing aggregate demand, but only a portion…

Q: If the marginal propensity to consume is 0.6, then according to the Keynesian Cross, the tax…

A: Answer to the question is as follows :

Q: A government spends $500,000 as an expansionary fiscal policy. The spending multipler is 2. a) if…

A: Changes in the price level, affects the spending multiplier.

Q: In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the…

A: Proportional tax refers to a tax that takes the same percentage of income from people with all…

Q: If the simple Keynesian macroeconomic model is used to explain expansionary fiscal policy, which of…

A: The theory of Keynesian economics states that the government should raise demand to increase growth.…

Q: If the marginal propensity to consume is 0.9, then the tax multiplier will be: Group of answer…

A: Here, it is given that the marginal propensity consume of an economy is 0.9 due to which a change in…

Q: Suppose that the national economy is experiencing a recession with an estimated recessionary gap of…

A: A recessionary gap refers to the gap that arises when the actual real GDP is lesser than the…

Q: Suppose that the government increases taxes and government purchases by equal amounts. What happens…

A: National income is the total value of final products and services manufactured in a country.

Q: f the government were to implement a fiscal policy during a case of recession, all of these proposal…

A: The ‘fiscal policy’ indicates the use of the ‘government spending’ & ‘tax policy’ to influence…

Q: Which of the following is NOT a fiscal policy action? Group of answer choices decreasing government…

A: The answer is - raising the quantity of money in circulation

Q: In which situation would it make the most sense to send stimulus checks as an exapansionary fiscal…

A: Answer: Correct option: b (Forced shut-downs of the economy due to a health pandemic lead to a…

Q: The tax multiplier is always more effective in stimulating the economy than government multiplier…

A: In Keynesian economics, it is assumed that changes in aggregate demand in the economy are able to…

Q: If the MPC in an economy is 0.6, government could shift the aggregate demand curve rightward by $30…

A: MPC is the marginal propensity to consume. It is that part of income or increase in income which is…

Q: Which of the following is true?   a.  All economists agree that the tax multiplier is smaller than…

A: Government spending multiplier = ratio of change in income/ratio of change in government spending.

Q: Calculate the fiscal multiplier if the marginal propensity to save is 0.2.

A: Marginal Propensity to Save = 0.2 Fiscal Multiplier = -MPCMPSor Fiscal multiplier = -MPC1 - MPC

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: Given the above model for an economy C = 100 + 0.8Yd G = 800 T = 500 I = 200 a) Calculate the level…

A: Hello, Thank you for the question. Since there are many sub-parts in the question, only the first…

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

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Draw a macro equilibrium using AD/AS. Clearly label all important points on your graph.

A: The AD-AS model is a graphical model for analyzing economic swings that comprise AD (aggregate…