I need the answer as soon as possible If the government purchases multiplier equals 2, and real GDP is $14 trillion withpotential GDP $14.5 trillion, then government purchases would need to increase by16.to restore the economy to potential GDP.A)$7.25 trillionB)$1 trillionC)$500 billionD)$250 billionNone of the above.

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Answered: If the government purchases multiplier…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 8P

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Similar questions

If the Marginal Propensity to Consume (MPC) is .90, estimate the total (multiplied) effect of government purchases/spending of $100B in the economy in terms of its aggregate expenditure (Hint: Multiplier = 1 / 1 – MPC). Calculate the net cumulative change in aggregate expenditure if taxes were cut by $200 billion and MPC is estimated to be .75. What if government expenditure was increased by $200 billion? (Hint: Total change in expenditure = multiplier x new expenditure or spending injection)
Suppose an initial increase in government spending (G) increased GDP by $50,000. If he simple spending multiplier is 2.5, the size of the initial government spending was
Suppose that the government expenditure multiplier is equal to 6. By how much should the government decrease government expenditures (G) in order to close this inflationary gap?
Government expenditures represents one of the injections of expenditure. Explain how an increase in government spending may have a multiplier effect in the economy.
In order to financially stimulate the nation, the Federal government injected $900 billion dollars into the economy. However, the results were less than spectacular. One reason could have been a failure to understand the marginal propensity to consume. Assume the marginal propensity to consume (MPC) was only 0.4. How much of that $900 billion went to increased consumption? Where did the rest of the money go? Increased consumption: Where did the rest go? Using MPC = 0.4, what is the spending multiplier (the actual numerical value please): What was the overall change in income as a result of the stimulus package after the multiplier completely works its way through the economy?
Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?
If in a economy, the marginal tax rate = 0.1, the marginal propensity to save = 0.25, and the marginalpropensity to inport = 0.005, what is the value of the multiplier? A 1.43, B 1.54, C. 1.67, D 2.0, and E2.5

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If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $14.5 trillion, then government purchases would need to increase by 16. to restore the economy to potential GDP. A) $7.25 trillion B) $1 trillion $500 billion $250 billion D) E) None of the above.