Explain how a progressive income tax system works as an automatic stabilizer in the economy during a recession; that is, explain what happens to income and taxes paid during a recession and how that change in taxes paid affects disposable income and consumption.

Q: Consider an economy described by the following equations: Y=C+I+G C=100+.75(Y−T)C=100+.75(Y−T)…

A: GDP refers to the total value of all goods and services produced in the country over a period of…

Q: Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the economy's…

A: Both a tax cut and increase in government spending are expansionary fiscal policy tools, aimed to…

Q: Which of these are examples of automatic stabilizers? A. sales tax revenues and income security B.…

A: The automatic stabilizer is a system in which when the economy is fluctuating or overhears, the…

Q: 8. Which of the following describes crowding out accurately? A) Government, businesses and consumers…

A: Hello, thank you for the question. Since there are  more than three multiple choice questions asked…

Q: Explain, using appropriate diagrams, how a rise in the household saving rate can cause a fall in…

A: GDP is the value of final goods and services produced in the country within a given period of time.

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: Suppose that real GDP for an economy is currently 16,000 billion, the government purchases…

A: Fiscal policy refers to the actions taken by the government to intefere in the economic activity and…

Q: Explain how built-in (or automatic) stabilizers work. What are the differences between proportional,…

A: Automatic stabilizers: The automatic stabilizers are the economic policies and programme of fiscal…

Q: True/False 1) Unemploymen benefits are an example of fiscal policy.2) According to Ricardian…

A: A transfer payment is a redistribution of income facilitated by the government of an economy as it…

Q: Suppose the government raises its revenue by a net tax of 25 percent on income, t = 0.25, the…

A: The public debt ratio shows how much a nation owes in the form of debts and indicates the capability…

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: Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral…

A: In Keynesian economics, the changes in aggregate demand are able to affect the real GDP level and…

Q: Define what is 'automatic stabiliser' in fiscal policy, and provide 2 examples

A: Meaning of Fiscal Policy: The term fiscal policy refers to the situation under which the…

Q: Assume that initial GDP is $1,000 and we want to expand it to $1,600. Average MPC for the country is…

A: Economists use the marginal propensity to save (MPS) to measure the link between income and savings.…

Q: C= C0+cYd. Investment, government spending, taxes and transfer payment is autonomous. Autonomous…

A: When planned aggregate expenditures, C+I+G, equal collective output, equilibrium income is…

Q: What is meant by discretionary fiscal policy? Give an example of how the government can use fiscal…

A: Discretionary fiscal policy is a planned change in the level of taxes or government expenditure.…

Q: "Even if there is full information and that wages and prices are fully flexible as what the…

A: Expansionary fiscal approach incorporates tax breaks, move installments, refunds and expanded…

Q: Suppose that the fiscal policy multiplier is 8.6. What is MPC? Use that MPC and assume that there is…

A: The value of MPC can be calculated as follows. The value of MPC is 0.883721.

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: Write and apply the concept of multiplier with the help of suitable example and diagram. How does…

A: Fiscal policy: It refers to the policy which is used by the government to correct the various…

Q: Which of the following is carried out in a contractionary fiscal policy? a. Higher taxes and lower…

A: Fiscal policy is initiated by the government of the country.

Q: Which type of discretionary fiscal policy is likely to have the smallest overall effect on GDP…

A: Discretionary fiscal policy is the government policy to control economic growth and aggregate…

Q: There will be no crowding-out effect when the government increases spending and the planned…

A: In economics, the crowding-out effect refers to the phenomenon of an increase in government spending…

Q: In a recession, needs-tested spending ________ and induced taxes ________. increases; increase…

A: Fiscal policy has two major parts: government spending(G) and taxes(T). Needs tested spending is the…

Q: How relevant is the multiplier concept to the implementation of expansionary and contractionary…

A: Spending multiplier: - it is a fraction that shows the magnitude of the change in national income…

Q: crowding out

A: Crowding out is a situation when increased interest rate leads to reduction in private investment…

Q: 1. Define a progressive income tax system.

A: since you have asked multiple questions and according to our policy we can only solve the first part…

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75 Tax multiplier = (-MPC/1-MPC) = (-0.75/1-0.75)= (-0.75/0.25)= -3.

Q: What are the desirable and undesirable effects of using a lump-sum tax to finance government…

A: A lump-sum tax is an exceptional method of tax collection, in view of a fixed sum, as opposed to on…

Q: Explain government crowding out and how it occurs. How do government surpluses affect real interest…

A: The answer and explanation for both these questions is as follows:-

Q: discretionary fiscal policy and nondiscretionary or built-in stabilization policy.

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Why does a $100 billion dollar increase in government spending increase output by more than $100…

A: The multiplier indicates that the number of times income increases by increasing government…

Q: What are the changes proposed by Budget 2021 in context of Income tax and their impact on…

A: The amendments to the income tax policies in the budget are to make it easier for citizens to…

Q: ich of the following is NOT the limitation to the use of discretionary fiscal policy to stabilize…

A: Discretionary fiscal policy is deliberate changes in the tax and expenditure policy of government.…

Q: Automatic stabilizers are increases in spending and reductions in taxes that__ ?which one? a.Are…

A: According to Keynesian macroeconomics, the change in aggregate demand is able to affect the output…

Q: If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will a. decrease…

A: The pending multiplier denotes the ratio of change in the real GDP to the change in the initial…

Q: Suppose, government is undertaking expansionary fiscal policy because of recessionary concerns. How…

A: The fiscal policy of the government would result in the policies of the government involving…

Q: describe the impact of a 300 billion dollar increase in government spending when the marginal…

A: Here, it is given that the economy has the marginal propensity to save as 0.20 and governement…