Decide true or false if it is false why it is false ? 1-When the government collects taxes in lump sum (taxes do not change with income), if the marginal propensity to consume satises 0< MP C < 1, then the government spending multiplier will exceed the balanced-budget multiplier 2-The recent vaccinations against the coronavirusmade

Decide true or false if it is false why it is false ? 1-When the government collects taxes in lump sum (taxes do not change with income), if the marginal propensity to consume satises 0< MP C < 1, then the government spending multiplier will exceed the balanced-budget multiplier 2-The recent vaccinations against the coronavirusmade

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 5.11P

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Suppose the government uses a balanced-budget policy, Önancing its expenditure bylump-sum taxes (i.e., G = T) Suppose the government wants to achieve the same output level as in the no-taxcase in 1 (b) above. (output level = 3800)i. Does it have to increase or decrease its expenditure (G) and taxes (T) with G = T , and by how much?ii. What is the value of the balanced-budget multiplier?iii. In the no-tax case in 1 (b); the G-policy can eliminate any trade imbalance(i.e., make NX = 0). Would the government be able to achieve exact tradebalance as well under the balanced-budget policy here? If not, would therebe a trade surplus or trade deficit, and how big is the surplus/deficit
A. If your MPC = 0.6 and government spending (G) increases by $800. What will happen to the equilibrium income? The Effect of Taxation: Tax Multiplier = -MPC X Spending Multiplier Problems: B. If the MPC = 0.8 and taxes go up by $1000, what will happen to the equilibrium income? Please fully complete both problems.
Consider the following model i) C = 1500 + mpc (Y – tY)ii) I = 800iii) G = 500iv) X – M = 500 – mpi (Y)where:t = the (flat) tax ratempc = the marginal propensity toconsumempi = the marginal propensity toimportsuppose mpc = .80, t = .25, mpi =.2 a. solve for the equilibrium outputb. Solve for the (government) spending multiplier.c When we discussed the multiplier we discussed the impact effect. For example, suppose that G increases by 100 to 600 and we assume, as we often do, that firms match the increase in demand by increasing Y by 100. In round two, this is an increase in income of 100 to consumers. Trace out exactly where this 100 increase in income goes in the second round and compare to our simpler treatment with a closed economy and lump sum taxes. Hint, there are three leakages to address(again, please be very specific as to where the 100 increase income ‘goes’ in this second round).d. What would happen to the multiplier if the mpi rises to .25. Please explain the intuition.
Model of a closed economy with government. Given isC = 50 + 0.8 (Y-T)I = 70G = 300t = 0.2a. Calculate Y0 and the multiplier.b. Calculate the budget surplus.c. Calculate Y0 and budget surplus for G=200.d. What are the consequences of a higher tax rate of 0.25? Calculate Y0, themultiplier and the budget surplus.
1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I = 300G = 800T = (1/2)*Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept?b. Find the equilibrium level of output.c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending.ii) Calculate the new equilibrium level of income.iii) Calculate the change in income and compare to the increase in government spending. Comment.iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv).Now G assumes its original value of G = 800.d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level of…
i) C = 1500 + mpc (Y – tY)ii) I = 800iii) G = 500iv) X – M = 500 – mpi (Y)where:t = the (flat) tax ratempc = the marginal propensity toconsumempi = the marginal propensity toimportsuppose mpc = .80, t = .25, mpi =.2a. solve for the equilibrium outputb. Solve for the (government)spending multiplier.c. When we discussed the multiplier we discussed the impact effect. For example, suppose that G increases by 100to 600 and we assume, as we often do, that firms match the increase in demandby increasing Y by 100. In round two,this is an increase in income of 100 to consumers. Trace out exactly where this100 increase in income goes in the second round and compare to our simpler treatmentwith a closed economy and lump sum taxes. Hint, there are three leakages toaddress(again, please be very specific as to where the 100 increase income‘goes’ in this second round).d. What would happen to the multiplier if the mpi rises to .25. Please explain the intuition.
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
2. Given: C = 250 + 0.8 Y I = 150G = 300TR = 100NX = 100t =0.25i) Find the equilibrium level of income.ii) Suppose, because of the current COVID 19 situation Ꞓ falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)?iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).iv) Draw a graph to show the appropriate changes between part i) and part ii).v) Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment.vi) Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly…
11. If the marginal propensity to consume is 0.5, the tax multiplier is:(A) -2.5. (B) -2 (C) -1 (D) -1.666
Given: C = 250 + 0.8 Y I = 150 G = 300 TR = 100 NX = 100 t =0.25 i) Find the equilibrium level of income. ii) Suppose, because of current COVID-19 situation C falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)? iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier). iv) Draw a graph to show the appropriate changes between part i) and part ii). v) Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment. vi) Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly…
5 Suppose the government implements an expansionary fiscal policy to finance e-toll gantries. Required ∆Y = R1 000, the marginal propensity to consume is 50% and the proportional tax rate is 40%. How much will government expenditure have to change to reach the required change in equilibrium income? a. R699 b. R800 c. R1 000 d. R1 200
Question2. Given: C = 250 + 0.8 Y I = 150G = 300TR = 100NX = 100t =0.25i) Find the equilibrium level of income.ii) Suppose, b 50, MPS falls to .05, I falls to10, G falls to 100 and NX falls to 10. How much TR should the government increase to havethe same level of equilibrium income as in part i)?iii) In determining the required change in TR in part ii), which multiplier did you use and why?(Hint: keep in mind the consumption tendency households may have under the COVID 19situation in selecting the multiplier).iv) Draw a graph to show the appropriate changes between part i) and part ii).v) Give an example related to current Bangladeshi situation where the government may follow a'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets thetransfer payment.vi) Instead of paying transfer (TR) if the government were to increase government spending (G),what type of crowding out would you expect? Briefly explain.vii) As we have observed recently that, a lot…