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- Suppose actual real GDP is $14 trillion and potential real GDP is $18.5trillion. If the marginal propensity to consume (MPC) is 0.85and government purchases increase by $526billion, then to close this gap lump-sum taxes should change by $_______billion. Please respond accurately and provide a detailed explanation with calculations; if not, I will downvote several times. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.Suppose the federal government gives taxpayers a tax cut financed by borrowing. If taxpayers their debts, total spending will: O decrease. O first increase and then decrease. O increase. O remain unchanged.Suppose that due ot a fiscal stimulus, there is an increase in disposable incomes of $100 billion in the first round. Then, $33 billion was spent in consumption from this initial change of the disposable incomes. Following the same marginal propensity to consume, how much is the change in consumption spending in the next round from the $33 billion?
- Please no written by hand and no emage Suppose that in the economy under consideration the consumption function can be written as C = 200 + .8(Y – T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X – M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Ye from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why. (d) Full employment output in this economy (Yf) is equal to $2000 what do you predict is happening to inventories if the full employment level of output is…Assume that, without taxes, the consumption schedule for an economy is shown below: GDP, Billions Consumption, Billions $100 $120 200 200 300 280 400 360 500 440 600 520 700 600 Graph this consumption schedule and determine the size of the MPC. Assume that a lump-sum (regressive) tax of $10 billion is imposed at all levels of GDP. Calculate the tax rate at each level of GDP. Graph the resulting consumption schedule and compare the MPC and the multiplier with those of the pretax consumption schedule. Now suppose a proportional tax with a 10 percent tax rate is imposed instead of the regressive tax. Calculate and graph the new consumption schedule and note the MPC and the multiplier. Finally, impose a progressive tax such that the tax rate is 0 percent when GDP is $100, 5 percent at $200. 10 percent at $300, 15 percent at $400, and so forth. Determine and graph the new consumption schedule, noting the effect of this tax system…If the Marginal Propensity to Consume (MPC) is .90, estimate the total (multiplied) effect of government purchases/spending of $100B in the economy in terms of its aggregate expenditure (Hint: Multiplier = 1 / 1 – MPC). Calculate the net cumulative change in aggregate expenditure if taxes were cut by $200 billion and MPC is estimated to be .75. What if government expenditure was increased by $200 billion? (Hint: Total change in expenditure = multiplier x new expenditure or spending injection)
- How much government spending needs to be increased to maintain full employment in the economy if the economy was facing recessionary gap of $800 billions? Assume MPC is .8. How much tax cut should government give if they wanted to eliminate this recessionary gap through tax cut1. Suppose the households in a hypothetical economy has the following consumption function C= a + cYd. Where is the disposable income. The government in this economy imposes a tax rate of to households’ income (ex. A means that 10% of households’ income goes to tax payments). a. What is the equation that describes the disposable income of households? b. What is the Planned Expenditure Equation? Assume that government expenditure is exogenous and Investment function is given by the equation I = I-br Where is the interest rate. c. Derive the equilibrium output in the goods market and show that the multiplier in this model is 1/1c(1-t). d. How does and the tax rate affects this multiplier (e.g., what happens to multiplier if c increases cet.par. , or if tax rate increases, cet.par)?Assume that the consumption function is given by C = 150 + 0.85(Y – T)and the tax function is given by T = t0 + t1Y where C = Consumption, Y = Total output/income, t0 = Autonomous/fixed tax and t1 = Tax rate. If t0increases by 1 unit, then explain whether consumption will be increased or decreased, and how much?
- Suppose that the marginal propensity to consume is dC/dy= 0.4 + (1 / sq. root of 3y + 10)(in billions of dollars) and that consumption is $9 billion when disposable income is $0. Find the nationalconsumption function C. Round numbers in your answer to two decimal places when appropriate.1. If the marginal propensity to consume is .6 and taxes are increased by 200 then equilibrium output will 2. C = 400 + 0.75Yd I = 100 G=200 T=100. The information given suggests that equilibrium income is equal to 3. real GDP for 2020 is equal to 1,000 billion. If the population for 2020 is estimated at 80 million, then per capita real GDP must beAssume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.