The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by? a) 100 b) 200 c) 750 d) 50

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by? a) 100 b) 200 c) 750 d) 50

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.A: Graphical Treatment Of Taxes And Fiscal Policy

Problem 1DQ

See similar textbooks

Related questions

Q: When the MPC increases: a. the government spending multiplier stays the same b. the government…

A: The marginal propensity to consume refers to that portion of the increased income that was spent by…

Q: If an increase in investment spending of $50 million by Amgen, a biomedical company, results in a…

A: Expenditure multiplier shows the effect of an initial increase in autonomous spending on total…

Q: Suppose the MPC is .6 and consumption increases by $8 billion. Consequently, total income through…

A: Given information, Change in consumption: $8 billion (increase) MPC: 0.6 Find: change in total…

Q: use the following equation. C = 50 + 0.6(Y – T) 9) What is autonomous consumption in this economy?…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Find out the value of the multiplier if the MPC is zero?

A: Generally in the given question, MPC is = zero MULTIPLIER = ?

Q: If a $200 billion increase in investment spending creates $200 billion of new income in the first…

A: ∆Y=160 billion ∆I=200billion K=∆Y/∆I =160/200 =0.8 So mpc=0.8

Q: Hello, I would like help on those assignments. Thank you!

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: a. The following information is a three sector economy of a Consumption function (C) = 310 +…

A: (Q) The following information is a three-sector economy of a Consumption function (C) =…

Q: Which of the following statements is correct? a) From an additional dollar of income the least…

A: Disposable income can be defined as the income available to the consumers after paying the taxes and…

Q: Suppose that when government spending increased by $200, total spending in the economy increased by…

A: Government spending multiplier = Increase in total spending / Increase in government spending = $600…

Q: The Finance Minister in Canada asked a policy analyst the following question "what value can the…

A: Multiplier refers to the economic factor that when changed cause change in the many other related…

Q: roup of answer choices As marginal propensity to consume (b) decreases, the spending multiplier…

A: Change in consumption following change in income is called marginal propensity to consumer.

Q: Assume the following economy: Autonomous Consumption = £10,000; Marginal Propensity to Consume =…

A: Given: The autonomous consumption = £10,000 MPC = 0.8 Investment = £30,000 Government spending…

Q: Assume that the MPC is 0.70. What is the income multiplier? Question 46 options: a) 0.3 b)…

A: MPC + MPS = 1 Where MPC is the marginal propensity to consumer MPS is the marginal propensity to…

Q: 47)Which one is TRUE? Select one: a. The larger the MPC, the smaller the multiplier. b. The…

A: The formula for multiplier stated in the textbook overstates the real world multiplier when we take…

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: The multiplier is the ratio of the change in ________ to a change in ________. Select one: a. the…

A: The multiplier (K) can be calculated using the following formula.

Q: A tax rebate that returns a certain amount of money to taxpayers can have a total effect on the…

A: Amount = $2000 spending = 70 %

Q: C= 500 + 0,8Y, tax rate(t)= 0,25, G=1000 ve I= 1200. X= 500, M= 500 + 0,1Y. Calculate the…

A: In an economy, the investment multiplier explains the change in the income level due to changes in…

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

A: Given, Consumption, C = 800 + 0.8 Yd Investment, I = 300 Government expenditure, G= 400 Taxes = T =…

Q: If the MPC = 3/5, then the government purchases multiplier is 5/3 5/2 5 1.5

A: Marginal propensity to consume is the proportion of the additional income used for the consumption…

Q: Suppose you have an open economy with Government sector imposing tax to finance its expenditures.…

A: Since you have posted a question with multiple sub parts we will solve only first three sub parts…

Q: If investment increases by $200, and as a result GDP increases by $800, then the a) multiplier is…

A: Investments are injections to the economy. Increase in final GDP arising from a new injection is…

Q: If the ratio of MPS and MPC is 1:4 then find the value of multiplier.

A: The concept of an investment multiplier states that every increase in public or private investment…

Q: How would an increase in taxes influence the size of a multiplier in a four factor model

A: The four factors of production in the economy are land, labor, capital, and organization and these…

Q: Consider a hypothetical closed economy in which there are no income taxes. If households spend $0.75…

A: Hello. Since you have posted multiple questions and not specified which question needs to be solved,…

Q: Hello, I sent this assignment an the last option could not be solved. Can you help me with letter D…

A: d.The marginal propensity to consume is the metric that quantifies the relationship between the…

Q: If Multiplier is 1/1-MPC and MPS+MPC=1, MPC= Marginal propensity to consume and MPS= marginal…

A: The economics as a study is based upon the idea that the societies tend to have a limit to the…

Q: Hello, I would like help on this assignment. I sent it earlier and the first three subparts were…

A: 4.) The above government policy is not fair to Xavier but on the other hand, is fair to Francis.…

Q: In the Build, Build, Build program of the government, describe how is a manufacturing firm…

A: Build, Build, Build program of government is basically for improving infrastructure in the economy.…

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: MPS is 0.10 B) MPC is 0.90 C) Multiplier is 10 D) All of the above

A: MPS is referred to Marginal Propensity to Save. It is the part of each extra dollar($) of income(Y)…

Q: Answer the following questions and provide the necessary solutions. 1. Compute the multiplier if a)…

A: Multiplier represent how many time money multiplied in economy it depends upon the MPC , because MPC…

Q: Suppose you have an open economy with Government sector imposing tax to finance its expenditures.…

A: C = 250 + 0.85YD where the tax rate is 10%. autonomous investment expenditures are 140 billion…

Q: If changes to expenditures include consumption at $2000, investment at $600, government spending at…

A: Here, given information is: Consumption: 2000 Investment: 600 Government spending: 500 Exports: 100…

Q: Prove that the multiplier is equal to 1/(1-mpc)

A: We know Y = C + I and C = a + bY where Y is income C is consumption I is investment a is…

Q: Which of the following statements is TRUE?

A: The value of spending multiplier is dependent on MPC and as well as MPS

Q: Suppose that the following information describes the economy of Wonderland: C = 300 + 0.8Yd I = 300…

A: In an open economy, when talking about multiplier, one need to know that: mps+mpc+mpm+mpt=1 Where,…

Q: True or False? Explain: The multiplier effect is likely to be greatest when the government spending…

A: The multiplier effect is likely to be greatest when the government spending is targeted at the…

Q: Suppose the consumption function is given by C(Y) = 50+0.5 (Y-T), where Y represents income and T…

A: "In a closed economy, macroeconomic equilibrium is attained at a point where total income (Y)…

Q: Suppose the economy's multiplier is 2. Other things equal, a $15 billion decrease in government…

A: Multiplier tells us that, by how much times the economy's GDP changes due to change in the any…

Q: Suppose that investment demand increases by $100. Assume that households have a marginal propensity…

A: MPC is 80% which symbolizes that a rise of 1$ in the income will lead to a $0.80 rise in…

Q: Scenario 34-1. Take the following information as given for a small, imaginary economy: • When…

A: To find multiplier, we need to know the marginal propensity to consume i.e MPC. Marginal propensity…

Q: If a $2000 increase in income leads to an $1600 increase in consumption expenditures, then the…

A: consumer income is split in two parts MPC and MPS here we calculate the following as follow-

Q: Define the term multiplier effect (accelerator principle)?

A: There is some connection between the two. However, it is critical to recognise that they are…

Question

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?

a) 100

b) 200

c) 750

d) 50

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 - Introduction

VIEW

Step 2 - Explanation

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

Which of the following statements is TRUE? A. The spending multiplier is calculated as 1/MPC B. The proportion of any income that is spent rather than saved is called the spending multiplier C. MPC is always equal to MPS D. The value of the spending multiplier will increase if MPC increases
If the government spends 10 million and the multiplier is 5, then real GDP will increase by: Group of answer choices 10 million. 20 million. 100 million. 50 million.
Which of the following statements is correct? a) From an additional dollar of income the least consumers can spend is 1 cent. b) If from an additional dollar of income there is 0 additional consumption, then MPC is 1. c) If MPC is zero, the multiplier is 1. d) One is a multiplier.
If consumers spend 90 cents out of every extra dollar received, the A) MPS is 0.10 B) MPC is 0.90 C) Multiplier is 10 D) All of the above
How would an increase in taxes influence the size of a multiplier in a four factor model
Prove that the multiplier is equal to 1/(1-mpc)
Pretend you are a member of the Council of Economic Advisers and are trying to persuade the members of the House Appropriations Committee to purchase $100 billion worth of new materials, in part to stimulate the economy. Explain to the members how the multiplier process will work.
Hello, I would like help on this assignment. I sent it earlier and the first three subparts were answered but I was told that I need to submit again to have the solution of the rest. Thank you Assume there are 2 people Xavier with a Marginal propensity to consume (MPC) of 80% and Francis with a Marginal Propensity to save (MPS) of 10%. Xavier enjoys life and has a minimum consumption of $10,000 without any income, while Francis is more modest, with a minimum consumption of $7,500 without any income. Demonstrate and explain the income-expenditure model for Xavier and Francis on separate graphs with income ranging from 0 to $100,000 in $20,000 increments. Compare the minimum income levels where savings begins for Xavier and Francis. How does the difference in MPC affect the economies for each state? If the government decides to take all savings above $2,000, is this fair to Xavier? Francis? e. How might this change their behavior? How is this relevant to discussions about wealth…
Suppose there is some hypothetical closed economy in which households spend $0.85 of each additional dollar they earn and save the remaining $0.15. The marginal propensity to consume (MPC) for this economy is ___ , and the spending multiplier for this economy is ___ .
Suppose that the federal government has decided to build a new bridge over Lake Washington. The environmental impact review of two methods of construction is part of the implementation lag. decision lag. information lag. multiplier lag.
Suppose there is some hypothetical closed economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The marginal propensity to consume (MPC) for this economy is (.25/.75/1/1.33/4) , and the spending multiplier for this economy is (.25/.75/1/1.33/4). Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to $_____ billion . This decreases income yet again, leading to a second change in consumption equal to $_______billion . The total change in demand resulting from the initial change in government spending is $ _______trillion. The following graph shows the aggregate demand curve (AD1AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2AD2) after the multiplier effect takes place. For…
Price of advertising in newspapers and magazines are Rs.5 and Rs.10 respectively. The total budget for advertising is Rs.105. For maximizing the sales, find out the best combination of advertisement in newspapers and magazines by using lagrangian multiplier.