ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 1.6P
To determine
the effect on the size of the spending multiplier, when the investment has an autonomous component and a component that varies directly with the level of real GDP.
Concept Introduction:
Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
16-
Which one of these will be deducted from gross output to determine the net output?
a.
Intermediate consumption
b.
Private income
c.
Factor income from abroad
d.
Total government spending
7-
The__________refers to the sum of all current incomes received by the individuals or households from all sources within the domestic territory of a country during an accounting year.
a.
National income
b.
Private income
c.
Personal income
d.
Passive income
10) Suppose net taxes are $50 billion. Government spending is $125 billion. Investment is $50 billion and consumption is $100 billion. What is national savings?
A) 50 billion
B) -50 billion
C) 75 billion
D) -75 billion.
Knowledge Booster
Similar questions
- 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?arrow_forwardQs 4: What is the meaning of the term ‘tax expenditure’?arrow_forward1. Suppose that a rise in income from P60,000 to P70,000 leads to an increase in consumption from P47,000 to P54,000.arrow_forward
- 1 a)What is the value added definition of GDP? What is meant by value added? b) Suppose that in a given year, a company spends € 400 million on intermediate goods, €800 million on wages of employees with no other expenses and makes total sales worth of € 1600 million. What is the value added of this company? c) The government wants to increase absolute savings and successfully incentivizes the people to save more (saving rate goes up). Show is a graph, what happens to equilibrium output. How could increase in savings lead to a paradox. 2.) a) What are the elements within autonomous spending? State the formula for the multiplier b)In the graph below, draw the demand function (Z) including autonomous expenditure. Label the area representing autonomous spending. Add the value of equilibrium output that you calculated in part c. ( images) c)Suppose the following characteristics of an economy: C = 150 + 0.4 YD , I = 270, G = 100, T = 50 Calculate the equilibrium output and mark it…arrow_forward8- A person’s disposable income decreases, and his personal income remains unchanged. This is because of ______. a. Decreased personal taxes b. Increased personal taxes c. Increased corporate taxes d. Unemployment reasonsarrow_forward19 - How does the increase in total expenditures affect the equilibrium income level?A) remains constantB) IncreasesC) first increase and then decreaseD) DecreasesE) Decrease first, then increase.arrow_forward
- - If personal income taxes are increased, disposable income and consumption increase. stay the same. decrease. change in an unpredictable directionarrow_forwardThe Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected: Year Aircraft Sales Average Price Disposable Constant Income (Dollars) (In constant 2006 dollars, billions) 2006 525 16,800 610 2007 450 8,000 610 2008 400 8,000 580 The arc price elasticity of demand between 2006 and 2007 is: The arc income elasticity of demand between 2007 and 2008 is: Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc…arrow_forwardTopic: Fiscal Policy 1. A government collects $0.35 on every new dollar of income. Of the remaining $0.65 of disposable income, 20% is spent on imports, and 10% of the disposable income is saved. a. What is the marginal propensity to withdraw?b. How much of each new dollar of income is spent on domestic consumption?c. What is the spending multiplier in this economy?arrow_forward
- 1 Which one of these will be deducted from gross output to determine the net output? a. Intermediate consumption b. Factor income from abroad c. Total government spending d. Private incomearrow_forwardACTIVITY 4: Assessment Assume that a country has a closed economy that has only three goods/services. That is, there is no trade with other countries, so the economy has consumption, investment, and government spending, but no net exports. Each year, the economy produces three haircuts that cost $10 each two factory machines that cost $100 each one highway repair that costs $500 1a. What is total GDP for this economy? 1b. What percent of GDP is consumption? 1c. What percent of GDP is investment? 1d. What percent of GDP is government spending?…arrow_forward1. This expenditure (formerly general government consumption) includes all current government expenditures for purchases of goods and services (including an employee). a. Capital expenditure b. Consumption c. Utilization d. Transfer paymentsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
