If a lump-sum income tax of $30 billion is levied and the MPS is .4, the consumption schedule will shift ______? a. downward by 18 billion b. upward by $18 billion c. downward by $30 billion d. downward by $12 billion
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If a lump-sum income tax of $30 billion is levied and the MPS is .4, the consumption schedule will shift ______?
a. downward by 18 billion
b. upward by $18 billion
c. downward by $30 billion
d. downward by $12 billion
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- Given thatG= 201= 35C = 0.9Ya + 70T= 0.2Y + 25Where, G, I, C, T and Ya are planned government expenditure and planned investment autonomous andconsumption expenditure and tax respectively.Calculate the equilibrium level of national income.(a) Assume that Gross Domestic Product (GDP)/Total output (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y – T) where T is the tax. Investment (I) is given by the equation I = 2,000 – 100r, where r is the real rate of interest, in percent. Taxes (T) are 500, and government spending (G) is also 500. What are the equilibrium values of C, I, and r?No written by hand solution a) Use the AS-AD model to describe the crowding-out effect of private investment occurring when the government decides to decrease taxation (T). Your analysis should include the AS-AD, IS-LM, and the money market graph. b) Assume that the government asked you to estimate how the above reduction in taxes will affect the income/GDP in the economy. How would you answer? (Hint: Mention and discuss not only graphs, but also the formula of the multiplier, and whether the multiplier is an accurate measure
- 16. Suppose that planned investment and planned government purchases do not depend on income:I = 15 and G = 17. Consumption, as you would expect, does depend on income via the consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12. Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best description of this situation? a. the (Y, AE) point is above the 45 degree line, Y will adjust down b. the (Y, AE) point is above the 45 degree line, Y will adjust up c. the (Y, AE) point is below the 45 degree line, Y will adjust down d. the (Y, AE) point is below the 45 degree line, Y will adjust up 17. (continued) Help you friend by calculating the equilibrium income for the AE model in the previous question. Y = _____Suppose actual real GDP is $14 trillion and potential real GDP is $18.5trillion. If the marginal propensity to consume (MPC) is 0.85and government purchases increase by $526billion, then to close this gap lump-sum taxes should change by $_______billion. Please respond accurately and provide a detailed explanation with calculations; if not, I will downvote several times. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.Question 4 Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.75Yd and generates $2200 output and income in equilibrium. Suppose also that the government spends 400 and imposes a lump-sum tax of 50. What is the level of intended investment? (round your answer to the nearest whole value)
- Suppose that the marginal propensity to consume is dC/dy= 0.4 + (1 / sq. root of 3y + 10)(in billions of dollars) and that consumption is $9 billion when disposable income is $0. Find the nationalconsumption function C. Round numbers in your answer to two decimal places when appropriate.Suppose the federal government gives taxpayers a tax cut financed by borrowing. If taxpayers their debts, total spending will: O decrease. O first increase and then decrease. O increase. O remain unchanged.Assume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.
- Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary fiscal policy as (1) cutting taxes by $10 billion, then by how much would total spending increase over an infinite period? (2) spending $10 billion, then by how much would total spending increase over an infinite period?How much government spending needs to be increased to maintain full employment in the economy if the economy was facing recessionary gap of $800 billions? Assume MPC is .8. How much tax cut should government give if they wanted to eliminate this recessionary gap through tax cutBy how much did the disposable income of rich people increase as a result of the 2017 drop in the top marginal tax rate from 39.6 percent to 37 percent? Assume rich people have $2 trillion of gross income in the highest bracket.