24 Suppose that taxes increase and money supply increases in such a way that output does not change. These policy changes willproduce in the short-run...A) An increase in investment and an increase in private saving.An increase in investment and a decrease in government spendingAn increase in investment and a decrease in consumption.D) A decrease in investment and an increase in public saving.

Increase in money supply increases aggregate demand and increase in taxes decreases aggregate…

Suppose that taxes increase and money supply increases in such a way that output does not change. These policy changes will produce in the short-run... A An increase in investment and an increase in private saving. В An increase in investment and a decrease in government spending An increase in investment and a decrease in consumption. D A decrease in investment and an increase in public saving.

Suppose that taxes increase and money supply increases in such a way that output does not change. These policy changes will produce in the short-run... A An increase in investment and an increase in private saving. В An increase in investment and a decrease in government spending An increase in investment and a decrease in consumption. D A decrease in investment and an increase in public saving.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter36: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 3PA

See similar textbooks

Similar questions

When a government reduces its deficits by increasing taxes, in the medium run,a. output returns to potential.b. IS curve shifts inward to the left.c. interest rate is higher.d. output increases. Explain..
Suppose the incoming Biden administration permanently increases taxes and government purchases by equal amounts. 1)What will be the impact (if any) on output in the short run? 2)What will be the impact on the economy’s normal real interest rate (r*) and normal investment (I*, which is the same as normal saving, S*)?
Could you do C and D A country has an initial real output of $162 Billion. What would the final output be expected to be if:a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75c. The government makes no changes to taxes or spending.d. The government decreases spending nationwide by $9 billion in a country where people are likely to withdraw 60 cents on every new dollar of income.
a) What generally happens to the major macroeconomic variables such as GDP, unemployment rate, and inflation rate during an economic recession? b) Define economic expansion using the reference terms of actual GDP and potential GDP. c) Explain how investment spending and interest rate related. What is the reason behind such a relationship? d) Find the correlation coefficient between interest rate and Real Investment. Does this (actual) value support the theoretical relationship between the variables? Explain. (e) Explain the importance of investment spending for the economy. Only typed answer
Government Policies That Affect Saving and Investment” 1 Taxes and saving 2 Taxes and investment You are required to take help from the “Book of Mankiw” and solve the above two Policy scenarios separately. You are required to edit graph and then explain it in detail after incorporating changes in policy-2, as policy-1 has been solved already. You are just required to explain policy-1 in few lines in your own words. While for Policy-2 first read the chapter and then edit the graph given. After incorporating changes/shifting, explain policy-2 in your own words.
1.a)Draw an A.D/A.S graph showing inflationary gap. b)Draw an A.D/A.S graph showing a recessionary gap. c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust) 2.Explain how savings function is derived from the consumption function, and how the saving schedule and graph of the saving function are constructed
Suppose that the typical consumer has a salary of $30,000 in 2017. His salary grows by 2% per year. What can we say about his ability to pay for his consumption basket over time? (A) He can never pay for his consumption basket without going into debt. (B) In 2017 and 2018, he can pay for his own consumption, but will be unable to in 2019 and 2020 without taking on debt. (C) From 2017-2019, he can pay for his own consumption, but will be unable to in 2020 without taking on debt. (D) He can always pay for his own consumption basket without taking on debt.
Suppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, and public saving is 0.2 billion. Assuming the economy is closed, calculate the size of:(i) Consumption (ii) Investment (iii) Government Spending (iv) National Savings b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.
1) Following is information for the economy of Donut. All units are million dollars. Their autonomous consumption is $500, and the marginal propensity to consume is 0.6. Investment spending is constant at $300, and government expenditure is constant at $200. Exports are constant at $100 and imports are constant at $230. Net taxes are constant at $100. Calculate and state your answers for the following questions. A.. What is the value of private saving in this economy when the real GDP is $500? B..What is the value of autonomous aggregate expenditure i.e. AE0? C..What is the size of the multiplier in this economy? D... What is the value of aggregate planned expenditure when real GDP is $1000?
Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?
10.1For each of the following events,explain the short-run and long-run effects on output and price level,assuming policymakers take no action. a) The stock market declines sharply,reducing consumers' wealth. b) The federal government increases spending on national defence. 10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment?Explain. a)When the investment accelarator is large or when it is small?
Suppose the following equations represents a closed economy: Y= C + I + G Y = 4000 G = 500 T = 500 C = 500 + 0.7 (Y – T) I = 1000 – 40r In this economy, compute the value of consumption (C), private saving, public saving, and national saving. Also, find the equilibrium interest rate (r). Now suppose that government spending (G) rises (expansionary fiscal policy) to 300. Compute private saving, public saving, and national saving. Also, find the new equilibrium interest rate (r). In part (b), due to expansionary fiscal policy (increase in government spending), which of the two other components of aggregate demand changes, C or I? Why? (Hint: Note the real interest rate)