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?

Q: Suppose that the level of GDP increased by $300 billion in a private closed economy where the…

A: Answer: Given, Change in GDP ∆GDP=$300MPC (marginal propensity to consume)=0.9Change in aggregate…

Q: Fiscal policy is conducted by the government and aims at boosting the economy; which of the…

A: The economies around the world have various entities, which are considered to be decision makers,…

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: 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: 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: Given the necessary increase in GDP of $360 and the MPC of 0.70, how much should we reduce taxes to…

A: The multiplier value depends on the marginal propensity consume. The higher the value of MPC ,…

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: Explain, using appropriate diagrams, how a rise in the household saving rate can cause a fall in…

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

Q: Suppose that real GDP for an economy is currently 16,000 billion, the government purchases…

A: Fiscal policy refers to the actions taken by the government to intefere in the economic activity and…

Q: Assuming you are the Minister of Finance and Economic Planning for Nigeria, in charge of Fiscal…

A: Given information MPS=0.20 Autonomous consumption=5000 Investment=7000 G=8000 T=2000 t=0.25…

Q: With an MPC of 0.8, government spending increases $20 billion while taxes decrease $10 billion.…

A: The effect of increase in government spending can be seen as: Multiplier: 11-MPC=11-0.8=5 The…

Q: Suppose the MPC is .80, the MPI is .10, and the income tax rate is 10 percent. What is the…

A: Given that, MPC = 0.80, MPI = 0.10 and income tax rate is 10 percent.

Q: n a closed economy such that: C = 100 + 0.8 (Y – T)             Md = 0.25 Y - 50 R I = 700 - 50 R…

A: The basis of the IS-LM model is an analysis of the money market and an analysis of the goods market,…

Q: f the current real GDP is P700 billion, which of the following policies would bring the economy to…

A: MPC = 0.8 => Government spending multiplier = 1 / (1-MPC) => Government spending multiplier =…

Q: Calculate the net cumulative change in aggregate expenditure if taxes were cut by $200 billion and…

A: Multiplier:Multiplier can be calculated as follows:

Q: How much government spending needs to be increased by to maintain full employment in the economy If…

A: *Answer:

Q: An increase in government spending will likely cause which of the following? An increase in the…

A: The macroeconomic equilibrium in an economy is determined by the aggregate demand and aggregate…

Q: If the government spends 10 million and the multiplier is 5, then real GDP will increase by: Group…

A: If the government spending = 10 million Multiplier = 5 Then government spending multiplier is…

Q: Given a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to…

A: MPC=0.75 Decrease in consumer spending=$300

Q: Suppose autonomous government spending increases by $100 billion and the value of the MPC is 0.6.…

A: Formula:  Multiplier = 1/(1-MPC)  Calculate multiplier as follows:  Multiplier = 1/(1-MPC)  =…

Q: Suppose that the national economy is experiencing a recession with an estimated recessionary gap of…

A: A recessionary gap refers to the gap that arises when the actual real GDP is lesser than the…

Q: Suppose that the government increases taxes and government purchases by equal amounts. What happens…

A: National income is the total value of final products and services manufactured in a country.

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 in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: Given data: MPC is 0.80 Expenditure gap is $80 billion

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: Suppose economists observe that an increase in government spending of $10 billion raises the total…

A: Marginal Propensity to Consume (MPC) refers to the level of additional consumption expenditure due…

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: Suppose the following data for an economy; a consumption function of C = 800 + 0.8Yd, Investment…

A: Aggregate expenditure is the sum of consumption spending, investment spending and government…

Q: Why does a reduction in taxes have a smaller multiplier effect than an increase in government…

A: Multiplier is defined as the number which denotes a proportionate increase in income due to increase…

Q: Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal…

A: Initially, due to the tax cut of 50,000,000 the spendings of people rose by the MPC (given as 0.9).…

Q: Suppose that the economy is experiencing a recession with an estimated recessionary gap of $15…

A: The expenditure multiplier shows the impact of a change in autonomous spending on total spending and…

Q: GDP, Billions Consumption, Billions $100 $120 200 200 300 280 400 360 500 440 600 520 700 600 c. Now…

A: Given the proportional tax = 10% We are required to find the new consumption schedule, MPC, and…

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: Suppose that the economy is experiencing a recession with an estimated recessionary gap of $20…

A: Given: Estimated recessionary gap = $20 billion Increase in government spending = $1 billion MPC =…

Q: The following exercises are based on the Appendix to this chapter. Answer exercises 11-14 on the…

A: (Since you have posted multiple sub-parts, we will answer the first three for you. If you want a…

Q: If an economy is experiencing an contractionary gap of 260 billion and the expenditure multiplier is…

A: Contractionary gap or recessionary gap refers to the situation where the level of output is less…

Q: If the MPC is 0.9 find the value of MPS using the formula

A:

Q: If the MPS were equal to 0.75, the expenditure multiplier would be * a. Less than zero b. zero c.…

A: Given: MPS=0.75 To find: Expenditure multiplier

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: The expenditure line is steeper than the 45-degree line. slopes upward because consumption depends…

A: Expenditure line is flatter than a 45 degree line. this is because for every increase in disposable…

Q: Suppose the MPC is 0.8. What is the tax multiplier in this economy? If the government were to lower…

A: Tax multiplier = - MPC / (1 - MPC)  = - 0.8 / (1 - 0.8) = - 0.8 / 0.2 = - 4

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 the MPC in an economy is 0.90, a $4 billion increase in government spending will ultimately…

A: Answer: Given, MPC = 0.90 Change in Government spending=44 billion The following formula will be…

Q: Our economist estimate that citizens in our country have an MPC of 0.90. To increase GDP by $1,000,…

A: GIVEN DATA   Our economist estimate that citizens in our country have an   MPC of 0.90.   To…