Consider the possibility that government spending increases productivity so that with lump sum taxes after an increase in government spending the original equilibrium level of consumption and leisure is still just affordable. (That is this point lies on the frontier of both the before and after PPFs. Be careful to make sure your drawing has this very unusual feature.) How will an increase in government spending affect consumption, hours worked, output and welfare

Consider the possibility that government spending increases productivity so that with lump sum taxes after an increase in government spending the original equilibrium level of consumption and leisure is still just affordable. (That is this point lies on the frontier of both the before and after PPFs. Be careful to make sure your drawing has this very unusual feature.) How will an increase in government spending affect consumption, hours worked, output and welfare

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth

Section: Chapter Questions

Problem 14SQ

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Consider the possibility that government spending increases produc- tivity so that with lump sum taxes after an increase in government spending the original equilibrium level of consumption and leisure is still just affordable. (That is this point lies on the frontier of both the before and after PPFs. Be careful to make sure your drawing has this very unusual feature.) How will an increase in government spending affect consumption, hours worked, output and welfare?
The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 Imagine the maximum potential output or real GDP of this economy is 100. Assume that is the same as saying we reach the edge of the PPF at 100. Now assume we want to get that economy from the current level of GDP to its maximum potential of 100. We can do this in two ways - either increase government spending (G) or reduce taxes, (we will soon learn that doing this is called "using expansionary fiscal policy") but this economy does not tax its citizens so the only way to do it to increase G. How much do we increase government spending so that actual GDP reaches potential output/edge of the PPF at 100?
True or False: It is possible, in a basic hours towards leisure and income towards consumption model, that the Earned Income Tax Credit can encourage more hours towards leisure, less hours towards work and more money towards consumption.
Which of the following is a use of the production possibility curve (PPC) in macroeconomics? a. The company decides the price of the product using PPC b. The economy finds solution to basic economic problems c. Private income of a company is calculated on the basis of PPC d. The company decides to produce product A or B
Between a straight line PPF and a concave PPF, which one is more realistic? Why?Defend your answer.
For both goods, assume output per hour remains constant as the number of workers allocated to that good changes. Wakanda produces both vibranium and adamantium. With vibranium on the vertical axis and adamantium on the horizontal what happens to the PPF if workers become more productive in producing vibranium but adamantium productivity does not change? Group of answer choices A.The PPF becomes steeper. B.The PPF becomes flatter. C.The PPF shifts out, with the new PPF parallel to the initial PPF. D.The PPF shifts out, but we do not know how the slope of the new PPF compares to the slope of the original PPF. E.The effect on the PPF need not be any of the above.
Explain three basic sources of deviations from PPP. Thanks.
How do choices end up determining what, how, and for whom goods and services are produced? Graphically explain efficient, inefficient, attainable and unattainable points in PPF.
What would it take for a point beyond the PPF to ultimately become attainable? Name an important assumption associated with the PPF. Why are models such as the PPF which require broad assumptions used in economics? Economics - Need details Thank You
It was reported in the New York Times that the China's State Council has encouraged more spending to "improve transportation links and other infrastructure... ". It was also reported that the China’s State Council will also "step up its spending on vocational training and other educational programs for adults". Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, China's PPF will Group of answer choices shift outward. shift inward. rotate outward become flatter.
If two economies are identical, except the savings rate in one economy is higher, explain why we might expect the economy with the higher savings rate to grow faster and in that sense be healthier.
Given a production possibilities curve for investment goods and consumption goods, which of the following statements is true? Select one: a. A production point outside the current curve may be attained if the opportunity cost of producing an extra unit of the good measured on the horizontal axis remains constant. b. Acquiring a new technology would push the PPF inwards towards the origin. c. A production point outside the current curve can be efficiently produced with the current level of resources and technology, if the marginal cost of producing one more unit of consumption goods equals the marginal benefit. d. A production point below the PPF suggests that more of both goods can be produced with current resources and technology. e. Shifting resources to make more consumption goods is likely to enable attainment of a production point outside the current curve.