• S = -1250 + 0.4 Y, I= 750 – 1600i • Ms= 1100, Mt = 0.15Y and Mp = 0.10 Y • A. Calculate Y eq, S, I, Mt, Mp and Msp. • B. If the government expenditure increase = 80, calculate the effectiveness of this policy. • C. Draw the graph.
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- Assuming that policy makers determine that a 500 billion increase in AD is needed to stabalize the economy. How much of an increase in governemnt spending would be required to achieve this. (note: the mpc=.80) lower taxes by 100 bn increase the money supply by 500bn raise spending by 100bn raise spending by 500bnSuppose that the marginal propensity to consume is dC/dy= 0.4 + (1 / sq. root of 3y + 10)(in billions of dollars) and that consumption is $9 billion when disposable income is $0. Find the nationalconsumption function C. Round numbers in your answer to two decimal places when appropriate.The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let's say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes to close the recessionary gap. How much will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let's say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume the MPC equals .80. How much will the tax increase be? The government wants to achieve a balanced budget. It therefore increases…
- describe the anticipated impacts of the Biden Covid Bill. Remember, the focus is only on one side of the equation: is it Agg. Demand or Agg Supply? Please be specific with provisions in the bill and anticipated impacts on the economy (affecting C, G, Net X or I).Give typed solution only assume an economy has an MPC of .5 and their full employment level of output is $500 billion. If their current GDP is $600 billion, what could their government do to try ans correct this? a) decrease taxes by $50 billion b) decrease government spending by $50 billion c) increase government spending by $50 billion d) increase taxes by $50 billionGiven 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?
- Q) In case of DEFLATION, mention that which particular type of fiscal policy will be used and why and either each fiscal policy tool will be increased or decreased. Explanation and reasoning for each tool and its working separately is must.What, if anything, does expansionary fiscal policy do in the i-M space graph, cet. par.? Explain. Indicate the disequilibrium that is created at the initial interest rate and explain what will happen and why. There is a liquidity trap in the i-M space graph. Show what this means in the i-M graph and then explain what type of macro policy will not work.You are studying an economy with an income tax rate, t1, of 32%and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the topolicythat it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.”[Hint: Let I change and compare the I multipliers in each of these economies.] \
- What is the effect of a government budget surplus on the real interest rate and investment?A government budget surplusO A. lowers, crowds outOB. lowers, increasesOC. raises, increasesOD. raises; crowds outthe real interest rate andinvestment.a. You are studying an economy with an income tax rate, t1, of 32% and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the to policy that it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.” [Hint: Let I change and compare the I multipliers in each of these economies.]Given the following closed economy model: C = .8Yd + 800I = 1000 G = 6000 T = .25Y + 100 Yf = 21,000 The size of the government spending multiplier (KDG) is: Round answer to one decimal place.
