Please answer precisely with explanation without any confusions. Q2: Keynesian Multiplier(a) Define the Keynesjan Fiscal Multiplier.(b) Plot the IS- and LM-curve in the same diagram. Distinguish between two cases (plot onegraph for each case):(1) upward-sloping LM-Curve(2) horizontal LM-CurveConsider a temporary increase in government expenditures and comment on the output-effeet in each case.

a) A theory known as a Keynesian multiplier. It states that the better the economy is, the more…

Q2: Keynesian Multiplier (a) Define the Keynosjan Fiscal Multiplier. (b) Plot the IS- and LM-eurve in the same diagram. Dist inguish between twa cases (plot one graph for each case): (1) upward-sloping LM-Curve (2) horizont al LM-Curve Consider a temporary inerease in government expenditures and comment on the output- effect in each ca.

Q2: Keynesian Multiplier (a) Define the Keynosjan Fiscal Multiplier. (b) Plot the IS- and LM-eurve in the same diagram. Dist inguish between twa cases (plot one graph for each case): (1) upward-sloping LM-Curve (2) horizont al LM-Curve Consider a temporary inerease in government expenditures and comment on the output- effect in each ca.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 20SQ

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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 trillion
Discretionary fiscal policy and multiplier effects Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.8. The following graph shows the aggregate demand curves (AD1AD1 and AD2AD2), the short-run aggregate supply curve (SRASSRAS), and the long-run aggregate supply curve (LRASLRAS). The economy is currently at point A. The economy is currently experiencing an expansionary a recessionary gap of $ billion. In order to close this gap, one option would be for the government to decrease increase government purchases by billion (assuming net taxes do not change).
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B.
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Based on this information, answer the following question: a) If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prior to the fiscal policy as A and the new point following the expansionary policy as B.
115.) If the marginal propensity to consume is 0.6, then according to the Keynesian Cross, the tax multiplier is -$3 -$1.5 -$0.6 none of the above
Consider the Aggregate expenditure model. Where:AD = C + I + G + NX (1)where I, G, and NX are all autonomous.C = C + c∗(Y + T R − T A)(2)where T A = tY with t ∈ [0, 1] is the proportional tax rate and c∗ ∈ (0, 1) is themarginal propensity to consume.a. Using the information above, solve for AD. Combineall the autonomous terms into one term, A. b. In an (x, y) plane, where Y is on the horizontal axis and AD is on thevertical axis, illustrate the AD curve you derived above along with the 450line.Make sure to explain how you got the Y-intercept and solve for the slope c. Provide an economic interpretation for the slope of the AD function. d. Solve for the equilibrium level of output and show what happens to outputwhen G increases by 1 unit. That is, what is ∆Y ? Show your result graphicallyand explain how the AD curves shifts and by how much. Briefly explain.
“Expansionary fiscal policy is more effective in influencing the aggregate income level when investment is interest-elastic”. Do you agree with this statement? Why and why not? Explain your answer based on the IS-LM framework.
Instructions: Enter your responses as a whole number. a. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ __ billion. b. The real GDP gap is $__ billion. c. The AD excess is $__ billion. d. Identify the new equilibrium that would occur with appropriate fiscal policy. Instructions: Use the tool provided 'QF' to identify the new equilibrium that would occur with appropriate fiscal policy. This full-employment GDP is $ __ billion.
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?
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B.
Discuss an expansionary fiscal policy on the keynesian cross and illustrate it. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. Using the AD-AS model and IS-LM model illustrate the impact of an expansionary fiscal policy. Label the initial points in both diagrams as A and the new points following the policy change as B. If the MPC rises to 0.8 and also the sensitivity of real money demand to changes in the income rises well, use the IS-LM model to illustrate the impact of an expansionary fiscal policy. Label the initial point prioer to the fiscal policy as A and the new point following the expansionary policy as B. explain the reasons that underly differences in policy effectiveness.