Suppose MPC = 0.75. If the government increases spending by $100 billion, Workers get $100 billion in income, spend _______ billion.

Q: By how much will GDP change

A: Government spending multiplier formula  ∆Y/∆G = 1/1-MPC ∆Y = 1/1-MPC × ∆G ∆Y = 1/1-0.80 × 10  ∆Y =…

Q: Analyse how the level and pattern of household spending may change when GDP decreases

A: Gross Domestic Product (GDP) is the value of final goods and services produced in the domestic…

Q: 21) "A $10 billion increase in taxes and a $30 billion cut in government spending" is the example of…

A: Fiscal policies are the ones that are related to the collection of revenue and decision of spendings…

Q: Why is a $100 billion increase in government spending on goods and services more expansionary than a…

A: According to the aggregate expenditure model Total income (Y) = Consumption (c +b(Y-Taxes) +…

Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…

A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…

Q: If income tax rates are increased in an attempt to balance the federal budget, we should expect to…

A: Income tax is tax on individual's income. The tax are levied in order to finance various project of…

Q: Calculate MPS if we know that MPC Is 0.67

A: The information given is the value of Marginal propensity to Consume which is:- 0.67 We have to find…

Q: The relationship between changes in spending and Real GDP without price increase is: a. Economic…

A: Real GDP is the value of goods and services produced in the economy in a given time period excluding…

Q: Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the…

A:

Q: The government of a country decides to double its current level of spending, causing real GDP to…

A: Gross domestic product (GDP): - GDP is the market value of all final goods and services produced in…

Q: Fiscal policy of increasing government expenditures can be more potent than monetary policy in…

A: Fiscal policy works through changes in government expenditures and changes in taxes, while monetary…

Q: For the economy as a whole Income must be more than expenditures. Select one: a. False b. True

A: For an economy, since total injections into the circular flow is equal to total leakages from the…

Q: An example of a fiscal policy designed to increase real GDP is a. a cut in taxes. b. an increase in…

A: Fiscal policies are designed to influence the aggregate demand, which further leads to affect the…

Q: Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a…

A: Recessionary Gap: The term recessionary gap refers to the economic situation when the real GDP of…

Q: Suppose an economy has an MPC = 0.875. 1. If government spending increase by $100, how much…

A: In economics, the marginal propensity to consume is a metric that quantifies induced consumption,…

Q: Given a full employment level of GDP of 700 Trillion and a current level of 750 Trillion and an MPC…

A: The economy is said to be in the full employment level of GDP at the level of 700 trillion whereas…

Q: If the government wants to increase real GDP levels, it could

A: Through fiscal policy government can increase real gdp.

Q: Along any given IS curve: a. government spending is fixed, but tax rates vary. b. tax rates are…

A: IS-LM stands for "investment savings-liquidity preference-money supply," or "investment…

Q: If the multiplier is 4 and a change in government spending leads to a cumulative $500 million…

A: The multiplier can be defined as the number which denotes the proportionate increase in income due…

Q: Expenditures that would exist at a zero level of income are called induced expenditures:  True or…

A: There are two types of expenditure : Induced expenditure and Autonomous expenditure  Induced…

Q: True or false? Explain why.      "The marginal propensity to consume out of transitory income is…

A: Marginal propensity to consume or MPC is the ratio of change in consumption due to change in income.…

Q: Say the MPC is .6 and suppose taxes are cut by $300 billion and government spending is increased by…

A: we can calculate the change in government spending by using the multiplier formula as follow-

Q: Explain the items of Government Expenditures in details

A: The aggregate expenditures refer to the total expenditures made by all the entities in an economy.…

Q: Which type of discretionary fiscal policy is likely to have the smallest overall effect on GDP…

A: Discretionary fiscal policy is the government policy to control economic growth and aggregate…

Q: If the MPC .8 and we have a 200B GDP Gap, how much will initial expenditures need to increase to…

A: GDP is the value of final goods and services produced in the economy within a given period of time.

Q: What happens to the real GDP if the government increases spending by $50 million and the government…

A: The government multiplier = 1.5 Government spending = $50 million

Q: The government spends an additional $926 billion and the marginal propensity to consume is 66%. How…

A: According to the question, it is given that : The government spends an additional $926 billion The…

Q: Suppose the MPC in an economy is 0.95. What should the government do with taxes if they want to…

A: The magnitude of change in income due to change in autonomous spending is known as multiplier. The…

Q: Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its…

A: The government in the fiscal policy either increase government purchases spending or decreases the…

Q: Suppose that an economy is in equilibrium at a level of output of $2000 million. Suppose further…

A: In an economy, a full employment level is one at which an economy can produce the potential level of…

Q: Given a full employment level of GDP of 700 Trillion and a current level of 670 Trillion the…

A: Full employment level refers to a situation as described by the classical economists that all the…

Q: An economy is at full employment. Which of the following can create an inflationary gap. Group of…

A: An inflationary gap exists when the demand for goods and services exceeds production due to factors…

Q: Instructions: Round your responses to two decimal places. If taxes were cut by $1 trillion and the…

A: Marginal Propensity to Consume refers to the proportion of income that consumers consume instead of…

Q: Should the government fight recessions with spending hikes rather than tax cuts ? Explain

A: Government spending and tax reductions have different multiplying effects on the economy.

Q: Use the following equations for exercises                                                     C = $…

A: C = $ 100 + .8 Y  I = $ 200  G = $ 250  X = $100 - .2 Y b=MPC = 0.8 GDP = C+ I + G + X GDP (Y)= 100…

Q: Give an example of a change in autonomous spending that took place during 2000-2010.

A: The financial crisis between 2000-2010 was spread in economy at large scale. The amount of spending…

Q: If the Marginal Propensity to Consume is 0.8, this means that       For each $1 increase in…

A: Given MPC = 0.8 Multiplier = 1/MPS

Q: The MPC is 0.5. what happens to the real GDP if the government increases spending by $10 million?

A: Given MPC = 0.5 Increase in government spending = $10

Q: MPC is 0.875. When tax increases by $1, GDP will decrease by $8. by $1, GDP will decrease by $7. by…

A: MPC = 0.875 Using the Tax multiplier formula

Q: (Fiscal Policy) Chapter 11 shows that increased government purchases, with taxes held constant, can…

A:

Q: If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will a. decrease…

A: The pending multiplier denotes the ratio of change in the real GDP to the change in the initial…

Q: If government spending rises by £500 million in an economy where the marginal propensity to spend is…

A: Marginal Propensity to spend or consume (MPC) represent that proportion of increase in income that…

Q: When comparing an increase in government spending on goods and services to an increase in private…

A: The gross domestic product measures the market value of all the final goods and services produced in…

Q: If this year, the government collects £250bn in taxes and spends £400bn, it must have a  a) budget…

A: In this question, we have to tell whether the economy will have a budget deficit or budget surplus…