Suppose governments increase spending for Social Security pensions. Explain why the increased government spending for pensions will not appreciably increase government purchases of productive resources or the products of business firms.
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Suppose governments increase spending for Social Security pensions. Explain why the increased government spending for pensions will not appreciably increase government purchases of productive resources or the products of business firms.
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- suppose the government in this economy decides to decrease government purchases by 300 billion decrease in government purchases will lead to a decrease in income generating an initial change in consumption equal toAssume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of the real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead if reducing its purchases, increased autonomous net taxes by $10 billion. a. 0.9 b. 0.8 c. 0.75 d. 0.6Due to the pandemic, govs have gone into more debt to support increased spending. Which of the following statements is true? (there can be more than 1) In the long-run, if interest rates rise, there will be a reduction in investments made by the private sector in the short run, the economy will stabilize as prices are stickier In the long run investments by the private sector will increase when the marginal propensity to consume is greater than 1
- In South Africa state-owned enterprises (SOE) and labour unions are currently putting pressure on government to finance their activities and to increase wages for civil servants. Discuss how politicians, bureaucrats and interest groups can contribute to the growth of government expenditure in the economy.Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. (a) If the equilibrium national income is less than the full-employment level of income by N$100, what should be the increase in government spending or in exports to attain the full-employment level of income? (b) With a help of a diagram explain and discuss life cycle hypothesis.Determine whether each of the following, other factors held constant, would, in the short run, lead to an increase, a decrease, or no change in the level of real GDP demanded: a. A decrease in government purchases b. An increase in net taxes c. A reduction in transfer payments d. A decrease in the marginal propensity to consume.
- (Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion. 0.9 0.8 0.75 0.6Consider the households in the US that held sub-prime mortgages before/during the financial crisis. Assuming high levels of debt and low job security (both features of sub-prime mortgage holders), are these sub-prime households more likely to have a large or a small marginal propensity to consume out of income? Provide reasons for your answer.Suppose that the U.S. government increases its expenditure on highways and bridges by $100 billion. Explain the effect that this expenditure would have on aggregate demand and real GDP.
- Determine the change in the equilibrium level of consumption (find ΔC) following a decrease in government spending from 400 to 300 (ΔG = -$100). A: positive 400$ B: negative 300 c: negative 400 D: positive 300Which of the following statements are correct? The introduction of government spending increases the size of the multiplier. The introduction of taxes increases the size of the multiplier. The introduction of taxes reduces the slope of the consumption function. Select one: A. A B. None of the statements is correct. C. C D. BConsider an economy in which the marginal propensity to consume is 0.75, prices are constant, G is initially 1,500, taxes are autonomous (not related to income) and are initially 2,000, transfer payments are initially 500, and GDP is initially 8,200. The economy is currently experiencing an inflationary gap. The government wishes to eliminate the gap and intends to reduce GDP to 7,000, and is considering changing government purchases, or taxes, or transfer payments. What new levels of these fiscal policy tools would be needed? In each case, what would the new government surplus or deficit be?
