If the multiplier is 4, government spending rises by $200, and taxes increase by $200, equilibrium income will: A. RISE BY $200. B. RISE BY MORE THAN $200. C. FALL BY $200. D. FALL BY LESS THAN $200. E. NOT CHANGE.
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If the multiplier is 4, government spending rises by $200, and taxes increase by $200, equilibrium income will:
| A. |
RISE BY $200. |
|
| B. |
RISE BY MORE THAN $200. |
|
| C. |
FALL BY $200. |
|
| D. |
FALL BY LESS THAN $200. |
|
| E. |
NOT CHANGE. |
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- True or False? Explain: The multiplier effect is likely to be greatest when the government spending is targeted at the poorest The poor will always spend most of the money they get as benefits as soon as possible Multiplier effect does not depend on who receives the money The richest people will spend a larger proportion of their money than the poorestSuppose 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 wasAssume 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?
- Consider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 Y=1700 consumption=1200 7) Imagine the government would like to increase equilibrium GDP to 2,000, what would it have to set the level of government spending to? 8) What is the size of the spending multiplier? 9) What is the size of the tax multiplier?Mathematically derive the formula of tax multiplier and interpret it. Does it depend upon marginal propensity to save? Explain
- Consumption function: C=500+0.8Yd , net tax: T=500, government spending: G=500, investment: I=1200, export: X=500 and imprt: M=700. According to this; Find the change in equilibrium level of output(Ye) if government spending increase 200. Use government spending multiplier.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?
- C = 250 + 0.8 Y (3+3+3+4+3+3+4=23)I = 150G = 300TR = 100NX = 100t =0.25i) Find the equilibrium level of income.ii) Suppose, b 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)?iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).iv) Draw a graph to show the appropriate changes between part i) and part ii). v) Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment.vi) Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly explain.vii) As we have observed recently that,…Q)Imagine the government wants to conduct an expansionary fiscal policy and needs an expert to answer the following questions before making a decision. a) Calculate the value of the multiplier effect if the marginal propensity to consume is 0.8. b) Calculate the increase in GDP which will occur, if the government increases its government spending by $600 million and the marginal propensity to consume is 0.8.A. If your MPC = 0.6 and government spending (G) increases by $800. What will happen to the equilibrium income? The Effect of Taxation: Tax Multiplier = -MPC X Spending Multiplier Problems: B. If the MPC = 0.8 and taxes go up by $1000, what will happen to the equilibrium income? Please fully complete both problems.