True False and a 1 sentence explaination please thanks.   D) If we assume marginal propensity to consume (b) is 80 % and marginal tax rate (t)is 15 %, and marginal propensity to import is 18 %, then 25 billion increase government expenditure will increase national income by 100 billion.

- If personal income taxes are increased, disposable income and consumption   increase.   stay the same.   decrease.   change in an unpredictable direction

60. Assume a recessionary gap of $300 B exists in the U.S. macroeconomy. Also assume that the MPC .80. How much do taxes need to change and do the change in taxes represent an increase or a decrease? (Use simple multiplier formula) A. $100 B, increase B. $300 B, increase C. $75 B, decrease D. $62 B, increase

1. The government expenditure multiplier is the effect of a change in government expenditure (G) on goods and services: a. An increase in aggregate expenditure increases aggregate demand (AD), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate demand (AD). b. An increase in aggregate expenditure increases aggregate supply (AS), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate supply (AS). c.  An increase in aggregate expenditure decreases aggregate demand (AD), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate demand (AD). d. An increase in aggregate expenditure decreases aggregate supply (AS), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate supply (AS).   2.  How do banks create money? Group of…

Aggregate expenditure (billions of 2007 dollars) 375 347 150 100 10 0 100 200 45° line AE C 300 375 Real GDP (billions of 2007 dollars) 6. Using the graph above, assume there are no taxes in this economy. Answer the following questions: a. MPC = b. MPM = C. MP to Spend = =Z= d. AE Function = e. Multiplier = f. Equilibrium level of Real GDP is

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Figure 4 Expenditures 9000 6000 3000 3000 6000 Disposible Income 1. In Figure 4, how much is government spending when disposable income is 3000? CH-G 9000 2. In Figure 4, how much is government spending when disposable income is 9000?

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