Answered: Taxes are reduced by $50 billion and…

Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the tax multiplier is: (A) -4. (B) -20. (C) -10. (D) -5.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter36: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 9QR

See similar textbooks

Related questions

Q: taxes and government spending of $40 will: A) increase GDP by $80 B) decrease GDP by $40 C) decrease…

A: The balanced-budget multiplier is equivalent to 1 in this situation . When the government rises…

Q: If the government 40 M on buildıng a new highway calculate the multiplier and total new income given…

A: When a surge in spending on various activities by the government takes place, the amount by which…

Q: 11. Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the tax…

A: Taxes Change (Reduction)=-$50 billion Income Change(Increase)=$1000 billion Tax multiplier shows the…

Q: 3. The balanced budget multiplier For both political and macroeconomic reasons, governments are…

A: Given; Income equation:- Y=11-c1c0+I+G-c1T a) When G increases by one…

Q: Problem 1. The following specifications are given for an economy: Consumption, C = 250 + 0.75…

Q: (Advanced analysis) Assume the saving schedule for a private closed economy is S= -20 + 0.2Y, where…

A: A private closed economy is a type of economy that is driven by consumer spending (also known as…

Q: Problem 11-04 (algo) uppose that a certain country has an MPC of 0.8 and a real GDP of $500 billion.…

Q: Comparing 2 fiscal policies, option 1 and 2, explain the positives and negatives from the chart…

A: THERE ARE TWO OPTIONS AND 4 SUBPARTS GIVEN IN THE ABOVE QUESTION - THE POSITIVE AND NEGATIVE WILL BE…

Q: Refer to problem 2. Assuming that spending multiplier is 4. Compute the value of RGDP at point B. *…

A: Spending multiplier refers to the ratio of change in Gross Domestic Product to the change in AE…

Q: If you were given the chance to create or amend the 2021 National Budget Plan, What executive…

A: If I was given the chance to create or amend the 2021 National Budget Plan, department of health…

Q: 7 - In a circular-flow diagram, funds that flow between households and the government are, 62 a)…

A: Circular flow diagram: It is a graphical representation of the flow of goods and services and money…

Q: Table 24.8 Consumption Spending All Figures in Billions of Dollars Planned Output Investment 2,600…

A: Given, C = 100 + 0.9Yd

Q: Consider this economy: C = 100 +0.5Y |= 400 + 0.1Y Drag and drop options on the right-hand side and…

Q: a) consumption and current saving. (b) Determine aggregate private saving, aggregate consumption in…

A: A) Each consumer’s current consumption and current saving. There are two sorts of individuals,…

Q: Consider this economy: C = 100 + 0.5Y 1= 400 + 0.1Y Drag and drop options on the right-hand side and…

A: The marginal propensity to consume (MPC) is the percentage of an increase in salary that a consumer…

Q: Which of the following would increase aggregate demand? Increase in savings. Increase…

A: The curve that depicts quantities of goods and services being demanded by consumers at various…

Q: 7 keys of effective budget and explain

A: A budget is a microeconomic idea that shows the compromise made when one great is traded for…

Q: 7. A government is utilizing fiscal policy by increasing government spending by 2 billion. If this…

A: Given information: The government spending is increasing by 2 billion => Change in government…

Q: Choose the correct answer: .Taxes are reduced by $50 billion and income increases by $1,000…

A: Tax multiplier indicates impact of change in taxes on the entire income of the economy. In…

Q: 14. If the tax multiplier is -6 and taxes are reduced by $100 billion, output: (A) falls by $100…

A: Given:Tax multiplier=-6Change in tax=$100 billion

Q: 4. In the 1960's the U.S economy faced inflationary pressures. Assume that in 1968 there was an AD…

A: The values being given in the question are as follows:- Excess Aggregate demand is given to be as =…

Q: 3. A fall in the income tax rate will O lower the multiplier and lower equilibrium income. O raise…

A: Macroeconomics is a part of economics that deals with production, decision and allocation concerning…

Q: 11. If the marginal propensity to consume is 0.5, the tax multiplier is: (A) -2.5. (B) -2 (C) -1 (D)…

A: Given: MPC=0.5

Q: 6. The multiplier effect of a change in government purchases Consider a hypothetical closed economy…

A: Since we only answer up to 3 sub-parts we will answer the first 3. Please resubmit the question…

Q: 10) If an economy's MPC is 0.8 and the MPM is 0.05, then an increase in government spending of…

A: Here, given information is, Marginal propensity to consume (MPC): 0.8 Marginal propensity to import…

Q: Derive multiplier for a change in the government purchase and the taxes. Why is the tax multiplier…

A: Government multiplier is the ratio of change in income and change in government expenditure. Whereas…

Q: #24. The dual problem to the one described in problem 2.3 is minimize X+y subject to xy =0.25 Solve…

A: Since it is evident 2-3 has been answered i will answer 2-4

Q: 5. Let C-120-0.6Y-140, G-200, T-100 (a) What are govemment spending multpler, tax multiplier, and…

A: Government spending or expenditure includes all government consumption, investment, and transfer…

Q: Question 18 A possible budget reform is a quadrennial budget breaking down the budget into…

A: Governments collect funds by levying taxes on residents, which they then use to support programmes…

Q: Mathematically prove that balanced budget multiplier is one. Interpret it

A: Answer to the question is as follows:

Q: Question 5/ 25 If government spending decreased by $500. Given that c= 100+0.75y and the initial…

A: here we calculate new equilibrium income by using the given information and choose the correct…

Q: c) Given the following economic models Y=C+I+G+ X-M C=1000+0.2YD- T=30+0.4Y I=100+ 0.15Y G = 40 X =…

A: NOTE: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Explain the importance of a budget and why you should develop a monthly budget. Write out in full…

A: Benefits of having a budget 1. Budgeting Gives you complete financial control: Take a second to…

Q: Topic: Fiscal Policy 1. A government collects $0.35 on every new dollar of income. Of the remaining…

A: The marginal propensity to save shows the percentage of new income saved. The marginal propensity to…

Q: Sa = -5000 and mpc or c = 0.8 Formulate the consumption function & interpret the function. Formulate…

A: here we calculate the saving and consumption function , so the calculation of the following by using…

Q: 15. If government spending increases by 1 billion euro, and mpc=0.4, how much should tax change to…

A: In an economy, when government makes changes in its expenditure or spending, it will have a…

Q: 6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor who…

A: Increase in the firm's output = Total expenditure / Price

Q: III. Given: C= 50,000 + .8YDISP T=.25Y TR = 10,000 G= 20,000 I= 10,000 (Consumption Function) (Tax…

A: Following formulas are used to calculate the: 1) Level of transfer payments: Using the formula for…

Question

13. Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the
tax multiplier is:
(A) -4. (B) -20. (C) -10. (D) -5.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

21- The purchase of a new car falls under which of the following types of expenditure? A) C B) M C) G D) X E) I
PMF, Inc., is equally likely to have EBIT this coming year of $10 million, $15 million, or $20 million. It's corporate tax rate is 40%, and investors pay a 10% tax rate on income from equity and a 40% tax rate on interest income. What is the interest tax shield if PMF has interest expenses of $5 million this coming year? A. $2 million B. $4 million C. $0.3 million D. $2.25 million
Only typed answer Suppose that an economy has the following functions for C, I, G, and NX: C= 51 + 0.89V I = 47 €=35 NX=12-0.10Y and the local tax rate is equal to 28%. What is the Simple Multiplier in this case?
The traditional method for accounting purposes is the Gross Domestic Product. However, this method does not account for environmental changes.a) Why is this considered a major sustainability issue? b) Outline four alternative methods that can used as opposed to GDP.
The savings rate is a. the difference between gross income and disposable income. b. the ratio of personal income to taxes paid on income. c. the percent reduction in taxes due to permitted deductions. d. personal savings as a percentage of disposable income. e. cash savings as a percentage of total net worth
14 Which of the following factors will lower down someone’s disposable income? a. More savings b. Low intermediate consumption c. High personal taxes d. More depreciation
9- Which of the following factors will lower down someone’s disposable income? a. More depreciation b. High personal taxes c. Low intermediate consumption d. More savings
In an economy, income raise by $5000 to $6000 million as a result of 20% rise in investment Calculate the value of investment multiplier
5- South Korea-based LG will open a new $1.2bn battery factory in Bekasi, Indonesia, in collaboration with the state-owned Indonesia Battery Corporation (Source: Investment Monitor). Discuss how the host country (Indonesia) can benefit from this FDI.
The value of total deposit is $1600 and the value of initial deposit is $300 Calculate the value of multiplier
9. The present value of a future cost is: a. greater if interest rates are higher.b. greater if interest rates are lower.c. independent of interest rates unless money is borrowed to fund the program or project.d. independent of the number of years between now and when the programs first benefits
Question 2: Evaluation of Public Expenditure The government has to choose between two different projects:1. Project 1 is organized in six years; the flows happen at the end of each period. It costs 100000, incurring immediately, and yields a return of 50000 for the first three years; in the fourth year, it yields a return of 50000, but the government has to sustain a cost of 20000 in order to make some necessary innovations to the structure of the plan; in the fifth year, it is able to generate a positive return of 60000, while in the last year the revenue is of 50000, but there is a cost of 10000 to close the project. The government assumes that, for the first four years, the discount rate should be 10%, while it is more appropriate to consider a discount rate of 15% in the last two years. 2. Project 2 is organized in four years; the flows happen at the beginning of each period. It costs 50000, incurring immediately, and yields a return of 35000 for the first three years; in the…