rèstion 21 points The economy is in a recession. The government enacts a policy to increase the real GDP by $10 billion The MPS is 02 Assuming that the aggregate supply curve in horizontal across the range of GDP being considered, by how much should the government change spending or taxes in order to schieve its objective? Show your calculations. O For the toolbar, press ALT+F10 (PO or ALT+FN+F10 (Mac). A V IUS Paragraph Arial 10pt 田田出田国 1T x X, OWORDS P

rèstion 21 points The economy is in a recession. The government enacts a policy to increase the real GDP by $10 billion The MPS is 02 Assuming that the aggregate supply curve in horizontal across the range of GDP being considered, by how much should the government change spending or taxes in order to schieve its objective? Show your calculations. O For the toolbar, press ALT+F10 (PO or ALT+FN+F10 (Mac). A V IUS Paragraph Arial 10pt 田田出田国 1T x X, OWORDS P

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.A: Graphical Treatment Of Taxes And Fiscal Policy

Problem 2TY

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Only typed answer and please don't use chatgpt Why will temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a. Because viewed the tax increase as permanent. b. Because people choose to increase their savings. C become people viewed taco increases temporarily d. Consumption expenditure are not related to level of taxtation
suppoose the MPC is 0.9 aand the MPI is 0.1.If government expenditure go up $100 billion while taxex fall $10billion, what hhaappen ttoo thhe equlibribum oof real GDP
No written by hand solution a) Use the AS-AD model to describe the crowding-out effect of private investment occurring when the government decides to decrease taxation (T). Your analysis should include the AS-AD, IS-LM, and the money market graph. b) Assume that the government asked you to estimate how the above reduction in taxes will affect the income/GDP in the economy. How would you answer? (Hint: Mention and discuss not only graphs, but also the formula of the multiplier, and whether the multiplier is an accurate measure
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Show all formulas and all work Given: Rufull employment = 2% Ru = 4% Potential GDP= $12,000 billion MPC = ¾ = .75 Find the multiplier Find GDPGAP% and then the GDPGAP Find the Recessionary Expenditure GAP Find the Government Spending that could close the GDPGAP Find the Tax change that could close the GDPGAP Find the amount of spending necessary to close the GDPGAP under a Balanced Budget spending program.
If the marginal propensity to consume is 0.75, byhow much would government spending have to rise toincrease output by $1,000 billion? By how muchwould taxes need to decrease to increase output by$1,000 billion?