pose actual real GDP is $7.54 trillion, potential real GDP is $12.32 trillion, and the marginal propensity to consume is 0.62. If we ignore price effects, by how many trillions of dollars should the government change its spending to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sig

pose actual real GDP is $7.54 trillion, potential real GDP is $12.32 trillion, and the marginal propensity to consume is 0.62. If we ignore price effects, by how many trillions of dollars should the government change its spending to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sig

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 17SQ

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Suppose actual real GDP is $13.56 trillion, potential real GDP is $12.34 trillion, and the marginal propensity to consume is 0.74. If we ignore price effects, and if the government already decided to increase its spending by $1.90 trillion, by how many trillions of dollars should the government change its lump sum taxes to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
Suppose actual real GDP is $13.37 trillion, potential real GDP is $12.33 trillion, and the marginal propensity to consume is 0.62. If we ignore price effects, by how many trillions of dollars should the government change its spending to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
Suppose actual real GDP is $9.06 trillion, potential real GDP is $6.42 trillion, and the marginal propensity to consume is 0.59. If we ignore price effects, by how many trillions of dollars should the government change its lump sum taxes to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
What is the eventual effect on real GDP if the government increases its purchases of goods and services by $75,000? Assume the marginal propensity to consume (MPC) is 0.75. $ What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $75,000? Assume the MPC has not changed. $ An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in an identical eventual effect on real GDP. no change to real GDP. a larger eventual effect on real GDP. a smaller eventual effect on real GDP.
If the Marginal Propensity to Consume is 0.8, this means that For each $1 increase in income, residents will increase their consumption by 20 cents. For each $1 increase in government purchase, spending in the economy will increase by $4.00. For each $1 increase in taxes, spending in the economy will decrease by $5.00. For each $1 increase in taxes, spending in the economy will increase by $4.00. For each $1 increase in taxes, spending in the economy will decrease by $4.00.
Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?