What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after- tax consumption to the table below. Answer is complete but not entirely correct. Consumption, Before Tax, Billions Lump-SumTax, Billions Consumption, After Tax, Billions GDP, Billions 100 120 10 1100 200 200 10 190 X 300 280 10 270X 400 360 10 350 X 500 440 10 430 X 600 520 10 510X 700 600 10 590 X Compare the MPC and the multiplier with those of the pretax consumption schedule. MPC after tax = 0.8 Multiplier after tax = 0.8 0 The MPC and multiplier are:

What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after- tax consumption to the table below. Answer is complete but not entirely correct. Consumption, Before Tax, Billions Lump-SumTax, Billions Consumption, After Tax, Billions GDP, Billions 100 120 10 1100 200 200 10 190 X 300 280 10 270X 400 360 10 350 X 500 440 10 430 X 600 520 10 510X 700 600 10 590 X Compare the MPC and the multiplier with those of the pretax consumption schedule. MPC after tax = 0.8 Multiplier after tax = 0.8 0 The MPC and multiplier are:

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 19SQ

See similar textbooks

Related questions

Q: suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075.…

A: To calculate increase in government spending we have to first calculate the spending multiplier.

Q: Assume that the consumption function is given by C = 150 + 0.85(Y – T) and the tax function is given…

A: Given; Consumption Function; (C)=150+0.85(Y-T) Tax function (T)= t0+t1Y where; C= consumption Y=…

Q: Q.1 DISTINGUISH BETWEEN INCOME AND DISPOSABLE INCOME Q.2 HOW DO TAXES AFFECT THE LEVEL OF AGGREGATE…

A: A person who works for a living is known to earn an amount of money that is known as income. This…

Q: Assume the MPC is 0.8. If government were to impose $20 billion of new taxes on household income,…

A: Given MPC = 0.8 New taxes imposed = $20 billion

Q: If a lump-sum income tax of $30 billion is levied and the MPS is .4, the consumption schedule will…

A: In short, consumption equation C = C + bY shows that consumption (C) at a given level of income (Y)…

Q: Suppose a government is established in a country where none previously existed. The government…

A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…

Q: Which of the following is a category of fiscal policy?A) government policies regarding transfer…

A: Since you posted multiple subpart questions, we will provide the answer for first three subpart…

Q: If the MPS in an economy is 0.4. What is the government spending multiplier? Group of answer choices…

A: In an economy, there used to be a proportionate link between economic factors that helps to…

Q: Suppose the government raises its revenue by a net tax of 25 percent on income, t = 0.25, the…

A: The public debt ratio shows how much a nation owes in the form of debts and indicates the capability…

Q: Instructions: In the table, enter your answers as a whole number. Round your answers for the MPC and…

A: a) MPC = ∆C/∆Y From the given table, ∆C = 80 ∆Y = 100 Hence MPC (c) = 80/100 = 0.8

Q: Given the national income model Y=C+I+G. C=400+0.72Y; I=100 and G=90 a) Obtain the equilibrium…

A: The national income in a closed economy can be calculated as the sum of consumption spending,…

Q: Suppose that autonomous consumption (a) is 300, private investment spending (I) is 420, government…

A: ‘Real GDP’ is a macroeconomic metric that measures the value of an economy's goods and services over…

Q: Use the following information on economy X to answer the questions below. Consumption function: C…

A: Given that, Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending:…

Q: Assume that, without taxes, the consumption schedule for an economy is as shown in the first two…

A: Please find the attached calculation below-

Q: Answer parts (a) - (e) below based on the AE equation AE = 2,500 + 0.9Y. (a) What is the level of…

A: Aggregate expenditure, AE is composed of consumption spending, investment spending, government…

Q: 27. What is the value of the "simple income multiplier" for autonomous spending? Zero 5/2 2/3 2/5…

A: Spending multiplier may be defined as a ratio of change in GDP to the change in autonomous spending…

Q: Assume that initial GDP is $1,000 and we want to expand it to $1,600. Average MPC for the country is…

A: Economists use the marginal propensity to save (MPS) to measure the link between income and savings.…

Q: Given that G= 20 1= 35 C = 0.9Ya + 70 T= 0.2Y + 25 Where, G, I, C, T and Ya are planned government…

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

Q: If the MPC is 0.8 and government spending decreases by $50 million, then equilibrium GDP will…

A: The equilibrium GDP:The equilibrium GDP can be calculated as follows:

Q: Given a full employment level of GDP of 700 Trillion and a current level of 750 Trillion and an MPC…

A: The economy is said to be in the full employment level of GDP at the level of 700 trillion whereas…

Q: Calculate how much output would expand by if the government increased spending by $500 billion and…

A: Here, we see that the change in Government spending, dG=$500 billion, and the change in lump-sum…

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

A: Recessionary gap It is the situation when Actual GDP is less than Potential GDP. In order to fill…

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: The government spends an additional $926 billion and the marginal propensity to consume is 66%. How…

A: According to the question, it is given that : The government spends an additional $926 billion The…

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 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: Suppose economists observe that an increase in government spending of 700 crore taka that raises the…

A: Given : Increase in government spending = 700 crore taka Increase in aggregate demand = 900 crore…

Q: Assume the MPC is 0.80. If government were to impose $200 billion of new taxes on household income,…

A: MPC refers marginal propensity to consume means rise in income of the consumer spend on consumption…

Q: Assume an economy in which: (i) there are no exports and no imports, (ii) investors always want to…

A: The national income is the total income earned by all the citizens of a country in a particular…

Q: QUESTION 35 1 Q: 1- mpc + mpc t (Ca +I+G+X„) %3D 1 AQ 1- mpc + mpc ·t (ACa + AI + AG + AXn) |= 100,…

A: We have given following information I = 100, G = 200, Ca = 100, Xn = -100 MPC = 4/5 = 0.8 and…

Q: Calculate how much output would expand by if the government increased spending by $500 billion and…

A: Government spending multiplier = 1 / 1 - MPC MPC = Marginal propensity to consume Change in…

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: 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: Consider the case of a closed economy for which the following initial data are known: c=0.70, t=0.3;…

A: Introduction We have given data of a closed economy. c = 0.70 , t = 0.3 , government expenditure…

Q: Use the following information on economy X to answer the questions below. Consumption function: C =…

Q: If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP…

A: here we can calculate the change in government purchase and choose the correct option which are as…

Q: At the equilibrium level of GDP in the table below, injections equal to? Leave your answer in RM…

A: GDP is the value of all final goods and services produced in an economy. Real GDP is the value of…

Q: net taxes were lowered from $5000 to $1000, the MPC is .75, and autonomous consumption spending is…

A: Disposable income refers to the remaining amount after paying all the necessary taxes.

Q: If MPC in an economy is 0.71 and government spending increases by 1,274, what will overall GDP…

A: We will answer the first question since the exact one was not specified. Please submit a new…

Q: Assume that government purchases decrease by $10 billion, with other factors held constant,…

A: The autonomous spending multiplier shows the change in national spending as a result of a change in…

Q: he MPS is 0.1 and the income tax rate is 0.33 the multiplier is approximately

A: Given, Marginal Propensity to Save [MPS] = 0.1 Income tax rate = 0.33 The Marginal Propensity to…

Q: Calculating the MPSAnd MPC. In one year a consumer income increase by $200 and her consumption…

A: Income of the consumer split into 2 parts - MPC and MPS , so here we calculate the MPC and MPS which…

Question

Instructions: In the table, enter your answers as a whole number. Round your answers for the MPC and the multiplier to 1 decimal
place.
What is the value of the MPC?
0.8
b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after-
tax consumption to the table below.
Answer is complete but not entirely correct.
Consumption,
Before Tax,
Billions
Lump-SumTax,
Billions
Consumption,
After Tax,
GDP, Billions
Billions
100
120
10
1101
200
200
10
190 X
300
280
10
270 X
400
360
10
350 X
500
440
10
430
600
520
10
510
700
600
10
590
Compare the MPC and the multiplier with those of the pretax consumption schedule.
MPC after tax =
0.8
Multiplier after tax =
0.8
The MPC and multiplier are:
higher before the tax.
higher after the tax.
the same before and after the tax.

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

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 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.

Recommended textbooks for you

Survey of Economics (MindTap Course List)

Economics

ISBN:

9781305260948

Author:

Irvin B. Tucker

Publisher:

Cengage Learning