If MPC = 0.9, short run equilibrium real GDP is $1,000, and full-employment real GDP is $2,000, then how much should government spending change to bring about full employment? A.decrease by $100 B.increase by $1,000 C.increase by $900 D.increase by $100
Q: a). A recessionary gap is how much GDP needs to increase from the current GDP to achieve full…
A: We know that if there is no change in government expenditure, then a change in tax can lead to a…
Q: d. Draw a Keynesian-cross model. Label the output level of 1,400 and the equilibrium output level,…
A: * SOLUTION :- As per guidelines I answered three sub parts only Thankyou.
Q: Aggregate Expenditure with Government (Fiscal Policy) Consider the following macroeconomic model…
A: The output Y is also known as real GDP calculates the total monetary value of the total final…
Q: Policy Options for Closing Output Gap Increase in Spending Tax Cut Spending Multiplier Tax…
A: Fiscal policy is the use of government spending and taxation to influence the economy.Fiscal policy…
Q: Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government…
A: Suppose When the Real GDP is $1.7 trillion, the potential GDP is $1.8 trillion and the federal…
Q: 3) Aggregate Expenditure with Government (Fiscal Policy) Consider the following macroeconomic model…
A: As you have posted multi-subparts question, as per answering guidelines we will solve first three…
Q: 6. Assume that the Simonian economy has a recessionary gap of $400 million and the marginal…
A: Amount of government spending required = Recessionary gap / Government spending multiplier Amount of…
Q: A country is in the midst of a recession with real GDP estimated to be $13.5 billion below potential…
A: It is given real GDP is estimated to be $13.5 billion potential GDP. MPC is 0.90
Q: Potential GDP 450 C+I+G+X-IM) E T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In…
A: When there is an excess of total disposable income above the value of available items at a specific…
Q: Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Show all formulas and all work Given: Rufull employment = 2% Ru…
A: Answer = "Thank you for submitting the question. But, we are authorized to solve only 3 sub parts…
Q: Economist C favors tax cuts over increases in government spending. This means that Economist C…
A: Government expenditure(G) multiplier and tax(T) multiplier shows the change in the total output(Y)…
Q: A- Saving (S), B- Marginal propensity to consume (MPC), C-Marginal propensity to save (MPS), D-…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Assume that equilibrium real GDP is $ 800 billion, potential real GDP is $ 950 billion, the MPC is…
A: The spending multiplier refers to the measure which explains the increase in the real GDP due to an…
Q: SRAS AD SRAS LRAS AD REAL GDP v in real GDP. Under the supply-side view, a decrease in marginal tax…
A: Answer: Graphical presentation: Due to a decrease in the marginal tax rate, there is a greater…
Q: 2. Consider an economy where aggregate demand AD consists of aggregate con- sumption C 10+ 0.8Y,…
A: Answer: Given, C=10+0.8YI=1000G=800 (d). The formula to find the government spending multiplier is…
Q: where Y is the country's real GDP, P is the price level (GDP deflator), G is government purchases of…
A: (Note: Since 1d and 2 are different only 1d has been solved). Question 1d: The macroeconomic…
Q: g. At the current level of equilibrium, the economy is experiencing a recessionary gap $4000. How…
A: Given: MPC=0.75 Autonomous consumption=$6000 Planned Investment=$2000 Planned government…
Q: Using the aggregate expenditures model, answer the questions below to show how government fiscal…
A: Full employment level refers to the total output produced by the economy with the given amount of…
Q: QUESTION 8 Refer to the diagram. If the full-employment level of GDP is B and aggregate expenditures…
A:
Q: c. The government makes no changes to taxes or spending. d. The government decreases spending…
A: If government makes no change in fiscal policy which is under consideration then there would be no…
Q: Assume the slope of the AD curve is equal to 0.4 and government introduces a fiscal policy stimulus…
A: As per the information given in question, let the slope of AD curve be represented by S i.e. S=0.4.…
Q: If the marginal propensity to consume is 0.75, net taxes are fixed at $2,000, and real income rises…
A: Marginal propensity to consume is calculated by dividing the consumption function by the change in…
Q: For each of the following events,explain the short-run and long-run effects on output and price…
A: Reduction in consumer wealth lowers consumption demand. A decrease in consumption decreases…
Q: Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and…
A: f) Full employment GDP is calculated as follows. Planned Expenditure=Autonomous consumption…
Q: 2. In a given economy potential GDP is at $2,000,000. If equilibrium/actual GDP is $1,300,000,…
A: here we calculate the investment which cover the gap in economy so the calculation of the following…
Q: Figure 25-4 45 Potential GDP Real GDP In Figure 25-4, if the economy is in a recessionary gap, what…
A: Recessionary gap means Real GDP is less than potential GDP.
Q: Suppose that the government wants to increase real GDP in the short run. To accomplish this it…
A: Increase government expenditures ----- is correct
Q: 2. Fiscal Policy options to address a recessionary gap: Suppose the economy's MPC is .75 or 3/4. A.…
A: Since, the question has various parts and it is not specified which arts are needed to be solved.…
Q: 3. Suppose the economy is in a recessionary gap.( the economy is not self-regulating and consider…
A:
Q: nternational Macroeconomics Y = C+I+G, where C=30+0.5*Y, I=100-10*r M=500-10*r+0.1*Y (Y and r are…
A: The fiscal multiplier is a Keynesian concept first presented by John Maynard Keynes's student…
Q: 14. Refer to the accompanying figure. PAE = 1,000 + 0.75Y 4,750 4,000 3,250 1,000 45° 3,000 4,000…
A: The equilibrium output is the point where the demand and supply in the economy becomes equal to each…
Q: C = 20 +.90(Y-T) |= 10 G= 10 Xn = 0 Let's assume taxes = 10, so we have a balanced budget G =T Solve…
A: In economics, the marginal propensity to consume (MPC) is defined as the proportion of an aggregate…
Q: Autonomous consumption = R100m Investment spending = R300m Government spending = R200 million…
A: Autonomous Consumption = 100 Investment Spending = 300 Government Spending = 200 Exports = 150…
Q: Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts? a.…
A: Permanent tax(T) cuts lead to the permanent reduction in income(Y) and affects both the…
Q: PAE = 600 + 0.5Y PAE = 400 + 0.5Y PAE = 200 + 0.5Y 600 400 200 45 400 800 1,200 Output, Y a.) Based…
A: In the given graph, three planned aggregate expenditure curves ar given with different autonomous…
Q: Refer to the table on the next page in answering the questions that follow:a. If full employment in…
A: a) If the full employment is at 130 million of employment, the full-employment GDP is $700 billion.…
Q: 11. Given the following Consumption Function as C = 350 + 0.75 (Y) ; and actual equilibrium real GDP…
A: Solution Option B is correct $25
Q: JA D F Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in…
A: If figure one measures the price and output relation and figure two measures inflation and…
Q: Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and…
A: G) Expenditure Multiplier = Y/Autonomous Expenditure Change in Planned Invetment or I= Y/Expenditure…
Q: he full employment level of GDP is 470 the current level of GDP output is 430. Income is 430 and…
A: Marginal propensity to consumer = Change in consumption / Change in the income MPS = 1-MPC…
Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…
A: All the parts of the question are solved below.
Q: The economy is experiencing a $225 million inflationary gap. If the government decided to solve this…
A: Given; Inflationary Gap= $225 million MPC= 0.9 Formula to calculate tax multiplier:-…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- 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 cutAssume that the short run equilibrium GDP is $4,000 billion and the potential GDP is $5,000 billion. The marginal propensity to consume is 0.8. [a] Would you classify this society more inclined to consume or save? Explain . [b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.Question #12 - Suppose the U.S. economy is troubled by inflation. The economy is in equilibrium at a real GDP of $15.5 trillion, the MPC is 0.90, and the full-employment output is $15 trillion. If the government decides to eliminate the inflationary gap by cutting government spending, what should be the size of the cut?
- Assume a contradictory gap of $4 trillion. With MPC equal to 0.75, what would be the recommended fiscal policy action in order to return output to full employment levels? a. Increase taxes by $4 trillion b. Decrease spending by $1 trillion c. Increase spending by $1 trillion d. Purchase $1 worth of government securities e. Decrease taxes by $4 trillionMacroeconomic** In the Keynesian model, when government decreases its spending by $20 billion, and it decreases taxes by $30 billion, and the MPC is .75, by how much will total spending in the economy change? Reg. multiplier = 4, tax multiplier = -3 Would this be 4 * 20 = 80 billion? The actual answer is 10 billion which I don't get it at all. Thanks.Suppose the president is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP? There is a $20 billion increase in equilibrium GDP. There is a $20 billion decrease in equilibrium GDP. There is a $15 billion increase in equilibrium GDP. There is a $15 billion decrease in equilibrium GDP.
- The economy is experiencing a contraction (recessionary gap) of $400 billion. What government spending stimulus would you recommend to move the economy back to full employment if the MPC is 0.75? Would your policy be any different if the MPC were 0.66?Assume that the marginal propensity to consume is 0.6 and potential output is $1000 billion. If real GDP is $1100 billion: Select one: a. there is an inflationary gap. b. the economy is in long-run equilibrium. c. there is a recessionary gap. d. government transfers should be decreased.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?
- The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let's say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes to close the recessionary gap. How much will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let's say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume the MPC equals .80. How much will the tax increase be? The government wants to achieve a balanced budget. It therefore increases…If the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP $200 million, then by how much would they have to change taxes? A.decrease by $240 million. B.decrease by $160 million. C.decrease by $180 million. D.decrease by $50 million.The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It, therefore,…
