If GDP in Makala is $300, what is the government's budget balance? b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP? c) What is the size of the government's deficit at this new level of equilibrium GDP?

If GDP in Makala is $300, what is the government's budget balance? b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP? c) What is the size of the government's deficit at this new level of equilibrium GDP?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter18: Public Economy

Section: Chapter Questions

Problem 19CTQ: Special interests do not oppose regulations in all cases. The Marketplace Fairness Act of 2013 would...

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Question

Answer the questions below for the economy of Makala, using the following graph:

a) If GDP in Makala is $300, what is the government's budget balance?
b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP?
c) What is the size of the government's deficit at this new level of equilibrium GDP?

320
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40
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400 500
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Real GDP
Government spending/net taxes

Definition Video Definition Overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period. Video

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