Question 3 Given the following information: 1= 150, G = 150, T-150 and C = 150 +0.75(Yd) Which of the following is true ? Equilibrium Output is 1550 20% is the Marginal Propensity to Consume MPC Tax Multiplier is 3 O None of the Choices O Equilibrium Output is 1550 O 20% is the Marginal Propensity to Consume MPC O Tax Multiplier is 3 O At least 2 of the choices दा

Question 3 Given the following information: 1= 150, G = 150, T-150 and C = 150 +0.75(Yd) Which of the following is true ? Equilibrium Output is 1550 20% is the Marginal Propensity to Consume MPC Tax Multiplier is 3 O None of the Choices O Equilibrium Output is 1550 O 20% is the Marginal Propensity to Consume MPC O Tax Multiplier is 3 O At least 2 of the choices दा

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 7SQ

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Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?
Suppose there is some hypothetical closed economy in which households spend $0.65 of each additional dollar they earn and save the remaining $0.35. The marginal propensity to consume (MPC) for this economy is 0.65 , and the spending multiplier for this economy is 2.8571 . Suppose the government in this economy decides to increase government purchases by $350 billion. The increase in government spending will lead to an increase in income, creating an initial change in consumption equal to (blank). This increases income yet again, leading to a second chance in consumption equal to (blank) . The total change in demand resulting from the initial change in government spending is (blank) .
Suppose there is some hypothetical closed economy in which households spend $0.85 of each additional dollar they earn and save the remaining $0.15. The marginal propensity to consume (MPC) for this economy is____ , and the spending multiplier for this economy is ____. Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to _____ . This decreases income yet again, leading to a second change in consumption equal to ____ . The total change in demand resulting from the initial change in government spending is ____.
The multiplier effect of a change in government purchases Suppose there is some hypothetical closed economy in which households spend $0.80 of each additional dollar they earn and save the remaining $0.20. The marginal propensity to consume (MPC) for this economy is (0.2 or 0.8 or 1 or 1.25 or 5), and the spending multiplier for this economy is (0.2 or 0.8 or 1 or 1.25 or 5). Suppose the government in this economy decides to increase government purchases by $400 billion. The increase in government spending will lead to an increase in income, creating an initial change in consumption equal to (320 billion or 2000 billion or 1000 billion or 80 billion or 160 billion). This increases income yet again, leading to a second change in consumption equal to (160 billion or 80 billion or 1000 billion or 2000 billion or 256 billion). The total change in demand resulting from the initial change in government spending is (2 trillion or 0.8 trillion or 1.6 trillion or 3.2 trillion).
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?
Consider the following model i) C = 1500 + mpc (Y – tY)ii) I = 800iii) G = 500iv) X – M = 500 – mpi (Y)where:t = the (flat) tax ratempc = the marginal propensity toconsumempi = the marginal propensity toimportsuppose mpc = .80, t = .25, mpi =.2 a. solve for the equilibrium outputb. Solve for the (government) spending multiplier.c When we discussed the multiplier we discussed the impact effect. For example, suppose that G increases by 100 to 600 and we assume, as we often do, that firms match the increase in demand by increasing Y by 100. In round two, this is an increase in income of 100 to consumers. Trace out exactly where this 100 increase in income goes in the second round and compare to our simpler treatment with a closed economy and lump sum taxes. Hint, there are three leakages to address(again, please be very specific as to where the 100 increase income ‘goes’ in this second round).d. What would happen to the multiplier if the mpi rises to .25. Please explain the intuition.
Suppose the following data for an economy; a consumption function of C = 800 + 0.8Yd, Investment spending is fixed at 300, Government purchases are 400, and net taxes are 100. A.) What is the MPC, MPS, and the value of the tax multiplier? B.) Suppose government increases taxes by 100, use the corresponding multiplier to calculate the new equilibrium level of income. C.) Check to ensure that the multiplier worked (confirm algebraically that your answer in B is correct, that is, solve for the new equilibrium level of income (Y)).
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Suppose there is some hypothetical closed economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The marginal propensity to consume (MPC) for this economy is (.25/.75/1/1.33/4) , and the spending multiplier for this economy is (.25/.75/1/1.33/4). Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to $_____ billion . This decreases income yet again, leading to a second change in consumption equal to $_______billion . The total change in demand resulting from the initial change in government spending is $ _______trillion. The following graph shows the aggregate demand curve (AD1AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2AD2) after the multiplier effect takes place. For…
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)
The multiplier effect of a change in government purchases Suppose there is some hypothetical closed economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The marginal propensity to consume (MPC) for this economy is (0.25 or 0.75 or 1 or 1.33 or 4), and the spending multiplier for this economy is (0.25 or 0.75 or 1 or 1.33 or 4). Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to (-$1,000 billion or -$187.5 billion or -$93.8 billion or - $62.5 billion or -500 billion). This decreases income yet again, leading to a second change in consumption equal to (- $93.8 billion or - 1,000 billion or - $500 billion or - $140.6 billion or -62.5 billion). The total change in demand resulting from the initial change in government spending is (-$1 trillion or - $1.9…
Assume that, without taxes, the consumption schedule for an economy is as shown in the table below. Impose a progressive tax such that the tax rate is 0 percent when GDP is $100, 5 percent at $200, 10 percent at $300, 15 percent at $400, and so forth. Determine the new consumption schedule, noting the effect of this tax system on the MPC (tax inclusive) and the multiplier.Instructions: In the table below, enter your answers (except the MPC) as whole numbers. For the MPC, round your answers to 2 decimal places. see the picture to understand :) PS. it's the yellow thing