Suppose that consumption is 70 million and disposable income is 350 and that the economy is experiencing a recessionary gap of 66 million. If the government spent 2 million and taxes were cut by 5 million, what happens to the GDP gap
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Suppose that consumption is 70 million and disposable income is 350 and that the economy is experiencing a recessionary gap of 66 million. If the government spent 2 million and taxes were cut by 5 million, what happens to the
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- Suppose the president is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP? There is a $20 billion increase in equilibrium GDP. There is a $20 billion decrease in equilibrium GDP. There is a $15 billion increase in equilibrium GDP. There is a $15 billion decrease in equilibrium GDP.Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a recessionary gap. How could a tax cut achieve the same result?suppose the government wishes to eliminate a recessionary GAP of 100 billion and the MPC is .75. How much must the government increase in spending instead of increasing government spending by the amount you calculated? What would be the effect of the government decreasing taxes by this amount explain?
- “If taxes and government spending are increased by the same amount, there will be no effect on equilibrium GDP.” True or false? Explain and support your answer using a specific hypothetical example.Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075. How much must the government increase in spending? Instead of increasing government spending by the amount you calculated what would be the effect of the government decreasing taxes by this amount explain?
- If income tax rates are increased in an attempt to balance the federal budget, we should expect to see a. a decrease in consumption and a decrease in GDP. b. a decrease in consumption and an increase in GDP. c. an increase in consumption and an increase in GDP. d. an increase in consumption and a decrease in GDP.Suppose the president is successful in passing a $10 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.8. What happens to equilibrium GDP? Group of answer choices There is a $50 billion increase in equilibrium GDP. There is a $40 billion decrease in equilibrium GDP. There is a $40 billion increase in equilibrium GDP. There is a $50 billion decrease in equilibrium GDP.Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making expenditures of $100 billion. How will this affect GDP if MPC=0.8?
- In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the marginal propensity to consume is 0.8. Investment is $160 million, government expenditure is $190 million, and net taxes are $250 million. Investment, government purchases, and taxes are constant—they do not vary with income. The island does not trade with the rest of the world. If the government increases its purchases by $200 million, what will be the change in the economy's equilibrium real GDP? Show the change on the graph as well.Suppose MPC = 0.75. If the government increases spending by $100 billion, Workers get $100 billion in income, spend _______ billion.You are given the following information about a closed economy with no government: Consumption = 115 + 0.6Y Investment = 550 Calculate the equilibrium level of income. Is the equilibrium level of income also the full employment level of income? Explain your answer.
