Answered: If there is a recessionary gap of $200…

If there is a recessionary gap of $200 Billion and the MPC is .9, how much would government spending have to increase to close the gap? 9.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 7PA

See similar textbooks

Related questions

Q: Assume the economy is currently experiencing a 100 billion-dollar recessionary gap. Furthermore,…

A: For finding the change in taxes, tax multiplier needs to be determined. Tax multiplier= MPC/(1-MPC)…

Q: Suppose the MPC is .90 and the MPI is .10. If government expenditures go up $ 100 billion while…

A: The expenditure multiplier shows the impact of change in autonomous spending on total spending and…

Q: suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075.…

A: To calculate increase in government spending we have to first calculate the spending multiplier.

Q: Level of investment goes up by 200. What happens with the level of GDP if you know that MPC = 0,8…

A: It is given that MPC=0.8 t=0.1

Q: Define the multiplier and the marginal propensities to consume (MPC) and save (MPS).

A: The consumption function is used to explain the relationship between consumption and disposable…

Q: Graph the following situation. Suppose the economy is in a recessionary gap and GDP is in…

A: A multiplier is a term used in economics to describe an economic factor that, when increased or…

Q: Ramey's estimate of the short-run "multiplier effect" of government purchases on GDP (i.e., dY/dG)…

A: According to Ramey, the inspection of the macroeconomic hypothesis and observational proof on the…

Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…

A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80…

A: A negative output gap also known as recessionary output gap is when the long run output exceeds the…

Q: Assume that the MPC is 0.9 and investment falls by $30 billion. What is the change in real GDP?

A: mpc is 0.9. Multiplier(M)= 1/1-mpc

Q: The marginal propensity to consume (MPC) is 0.90. The multiplier is 10. (Round your answer to one…

A: Marginal propensity to consume is the proportion of the disposable income that a person wants to…

Q: If the MPC is 0.9 what will happen to GDP if the government cut spending bt S2.

A: Given data: MPC, c=0.9Government spending, G=$2

Q: If the MPC In an economy Is 0.80, government could close a recessionary expenditure gap of $100…

A: Meaning of Money Multiplier: As from the word, the money multiplier refers to the situation under…

Q: With an MPC of 0.8, government spending increases $20 billion while taxes decrease $10 billion.…

A: The effect of increase in government spending can be seen as: Multiplier: 11-MPC=11-0.8=5 The…

Q: Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making…

A: If MPC=0.8 then MPS=1-MPC MPS=1-0.8 MPS=0.2

Q: A recessionary gap is how much GDP needs to increase from the current GDP to achieve full…

A: Recessionary gap: In general, a recessionary deficit is a disparity between real and future demand…

Q: The value of the Multiplier decreases in only one of the following cases: O An increase in the…

A: Multiplier states the change in the variable due to change in autonomous Variable.In terms of…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: The marginal propensity to consumer (MPC) refers to the change in the change in the consumption…

Q: Suppose an economy has an MPC = 0.875. 1. If government spending increase by $100, how much…

A: In economics, the marginal propensity to consume is a metric that quantifies induced consumption,…

Q: suppose the government wishes to eliminate a recessionary GAP of 100 billion and the MPC is .75.…

A: Recessionary gap is when the country's GDP is lower than its GDP at full employment level.…

Q: An increase in government spending will likely cause which of the following? An increase in the…

A: The macroeconomic equilibrium in an economy is determined by the aggregate demand and aggregate…

Q: Troll Island is a small island nation that recently experienced an autonomous change in aggregate…

A: Given Information- Aggregate expenditures (AE) increased by 77 billion. And the marginal propensity…

Q: Calculate the net cumulative change in the aggregate expenditure if taxes were cut by $200 billion…

A: Marginal propensity to consume measures the proportion of extra income that is spent on consumption.…

Q: Given a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to…

A: MPC=0.75 Decrease in consumer spending=$300

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $100…

A: ANSWER The marginal propensity to consumer (MPC) refers to the change in the change in the…

Q: In an economy the value of the marginal propensity to save is 0.39. calculate the value of MPC

A: # The value of marginal propensity to consume is given by the difference as:- MPC = 1 - MPS

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $160…

A: Here, it is given that MPC is 0.8, which implies that an increase in income by 1 percent will lead…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: Given data: MPC is 0.80 Expenditure gap is $80 billion

Q: If economic predictions showed the U.S. GDP to be decreasing by approximately $500 billion next…

A: We will answer the first question only. Please resubmit the question with any other parts you'd like…

Q: AS AD, AD Y, Y=Y¡ Recessionary gap Refer to the diagram shown below. Suppose AS curve is horizontal…

A: Aggregate demand is a sum of consumption spending, investment spending, government purchases and net…

Q: For this question, assume AE = 900 + 0.75Y and the full-emloyment level of income is 4000. What is…

A: Recessionary gap is the gap between the level of real GDP and potential output, when the real GDP is…

Q: Consider a hypothetical economy where there are no taxes and no foreign trade, and households spend…

A: Given information: Household spends $0.90 of each additional dollar they earn and save the remaining…

Q: An Economy has no imports or taxes, the MPC is 0.90 and real GDP is $12 trillion. If businesses…

A: Answer: Given values: MPC(marginal propensity to consume)=0.90GDP=$12 trillionIncrease in business…

Q: The total expenditure schedule in Macroland begins with these initial levels (in billions of…

Q: The country is experiencing a serious rise in inflation which the government wants to control…

A: Gross domestic product is the market value of all goods and services produced in the economy in a…

Q: Explain briefly how spending can multiply, and then calculate the spending multiplier when the MPC…

Q: If the marginal propensity to consume (MPC) increases. A. The MPS increases B. The multiplier…

A: here we can find the correct answers as follow-

Q: What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary?…

A: The marginal propensity to consume (MPC) measures the change in the consumption spending of…

Q: If the MPC is .6 and the equilibrium GDP is $30 billion below the full employment GDP, then the size…

A: Recessionary expenditure gap = (Full employment GDP - Equilibrium GDP) / Multiplier, where…

Q: As the marginal propensity to consume (MPC) increases, As the marginal propensity to save (MPS)…

A: The formula is given as: Multiplier = 1/ (1-MPC) or 1/MPS

Q: Suppose that the level of government spending increased by $100 billion where the marginal…

A: Aggregate expenditure: It means the present value of finished goods and services in the economy.

Q: The marginal propensity to consume (MPC) is 0.75. The multiplier is (Round your answer to ane…

A: Gross domestic product (GDP) is the total market value of all final commodities manufactured in an…

Q: If an economy is experiencing an contractionary gap of 260 billion and the expenditure multiplier is…

A: Contractionary gap or recessionary gap refers to the situation where the level of output is less…

Q: The MPC is 0.5. what happens to the real GDP if the government increases spending by $10 million?

A: Given MPC = 0.5 Increase in government spending = $10

Q: can you please answer strating form D to F Given the information below, answer the questions…

A: Given C = $40 + 0.8Y I = $30 G = $40 X – M = -$10 Initial…

Q: Nigeria is currently experiencing a recessionary gap of approximately 24.6 billion in their…

A: Tax multiplier = MPC / 1-MPC Recessionary gap = Real GDP is less than potential GDP.

Q: if the MPC in an economy is .80 government could shift the aggregate demand curve leftward by $48…

A: Answer: Correct option: (A) increasing taxes by $12 billion Explanation: If the government increases…

Q: Suppose MPS=0.68 and MPI=0.17 19. What is the spending multiplier? 20. What is the level of real GDP…

A: Government spending refers to money spent by the public sector on the acquisition of goods and…

Question

Questions 9 and 10?❤️❤️

0.67
If there is a simultaneous increase in government spending of $450 Billion and an increase
in taxes of $450 Billion, the change in Real GDP will be
7.
-2.037
If there is a recessionary gap of $200 Billion and the MPC is .9, how much would government
spending have to increase to close the gap?
9.
10. If there is an inflationary gap of $400 Billion and the MPS is .2, how much would taxes have
to increase to close the gap?
acer

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?
14 If government spending and taxes both change by the same amount, how much must they change to eliminate the recessionary gap? 15. Suppose the MPC is .90 and the MPI is .10. If govern- ment expenditures go up $100 billion while taxes fall
1. Suppose the MPC is .90 and the MPI is .10. if government expenditure goes up $100 billion while taxes fall $10 billion, what happen to the equilibrium level of real GDP? Use following equations for exercise 2-4 C= $100 + .8Y I=$200 G= $250 X = $100 - .2Y 2. What is the equilibrium level of real GDP? 3. What is the new equilibrium level of real GDP if government spending increases by $150? 4. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150? 5. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?
a) What are the three fiscal policy tools and how would each be used to counter a contractionary gap? b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction. c) If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much should I increase government purchases to eliminate the gap? d) Continuing with c, if the MPC is 0.8, how much would I need to increase transfer payments to eliminate the $500 billion contractionary gap? e) True or False and explain: Households always react to tax changes in a predictable manner. Module 6: Deficits and the Debt. a) Distinguish between deficit and debt. b) Explain what crowding out is and why it reduces the impact of fiscal stimulus. c) True or false and explain: The national debt represents a threat of bankruptcy. (For d and e) Suppose the interest on the debt was $600 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is…
1. If an economy has an MPC of 0.9 what is the multiplier? 2. If an economy has an MPS of 0.2 what is the multiplier? 3. If an economy has an MPC of .08 and the government needs to close a recessionary gap of 20 Billion dollars how much government spending should occur? 4. If an economy has an MPS of .05 and the government needs to close an inflationary gap of 10 Billion dollars how much should government spending decrease?
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?
Asap both 1.a) Which of the following statements is correct?l.Expansionary fiscal policy is used to remove a recessionary gap.ll. Expansionary fiscal policy is used to shift AD right.A) l onlyB) I onlyC)both I and ID) neither I nor ll 1.b) Which of the following are examples of contractionary fiscal policy?A) decreasing government expendituresB) increasing taxesC) increasing transfer paymentsD) A and B are both contractionary fiscal policiesE) A, B, and C are all contractionary fiscal policies
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 cut
1) Assume that Canadian government taxes away $0.15 of each dollar of new income, that 35% of the remaining $0.85 of disposable income is spent on imports, and that 2% of disposable income is saved. Enter your responses below rounded to 2 decimal places. a. The marginal propensity to withdraw is . b. From each new dollar of income $ is spent on domestic consumption items.c. The value of the Canadian spending multiplier is . 2) In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers. a. If government purchases increase by $3 billion in an economy with an MPW of 0.65 then the spending multiplier is and the AD curve finally shifts to the by $…
12. If MPC in an economy is 0.71 and government spending increases by 1,274, what will overall GDP increase by? Please round to two decimal places where needed._________. 13. Potential GDP equals $500 billion. The economy is currently producing GDP equal to $450 billion. If the MPC is 0.67, then autonomous spending must change by $______ billion for the economy to move to potential GDP? Please round to two decimal places where needed._________.
Mexico's real GDP fell from 4.5 trillion pesos to 3.8 trillion pesos over the first part of 2020. In that same time, its consumer spending fell from 3.1 trillion pesos to 2.5 trillion pesos. Assume that real GDP represents disposable income. Using these values, what is the size of the tax cut multiplier? (Round answers to one decimal place.