Bundle: Macroeconomics For Today, Loose-leaf Version, 10th + Aplia, 1 Term Printed Access Card
10th Edition
ISBN: 9781337738996
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Question
Chapter 11, Problem 9SQ
To determine
The impact of equal increase in the tax rate and the government spending.
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Students have asked these similar questions
If the government wants to increase real GDP levels, it could
A) decrease government expenditures and increase taxes.
B) increase government expenditures.
C) decrease government expenditures.
D) increase taxes.
ECONOMICS
An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4
billion.
The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.
Which of the following is incorrect regarding tax revenues?
a.they increase during recessions
b.they increase during economic expansions
c. they are a revenue source in the government's budget
d. they change with changes in the tax rate
Chapter 11 Solutions
Bundle: Macroeconomics For Today, Loose-leaf Version, 10th + Aplia, 1 Term Printed Access Card
Ch. 11.3 - Prob. 1YTECh. 11 - Prob. 1SQPCh. 11 - Prob. 2SQPCh. 11 - Prob. 3SQPCh. 11 - Prob. 4SQPCh. 11 - Prob. 5SQPCh. 11 - Prob. 6SQPCh. 11 - Prob. 7SQPCh. 11 - Prob. 8SQPCh. 11 - Prob. 9SQP
Ch. 11 - Prob. 10SQPCh. 11 - Prob. 11SQPCh. 11 - Prob. 1SQCh. 11 - Prob. 2SQCh. 11 - Prob. 3SQCh. 11 - Prob. 4SQCh. 11 - Prob. 5SQCh. 11 - Prob. 6SQCh. 11 - Prob. 7SQCh. 11 - Prob. 8SQCh. 11 - Prob. 9SQCh. 11 - Prob. 10SQCh. 11 - Prob. 11SQCh. 11 - Prob. 12SQCh. 11 - Prob. 13SQCh. 11 - Prob. 14SQCh. 11 - Prob. 15SQCh. 11 - Prob. 16SQCh. 11 - Prob. 17SQCh. 11 - Prob. 18SQCh. 11 - Prob. 19SQCh. 11 - Prob. 20SQ
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Similar questions
- Use the following equations for exercises 16–18. C= $100+.8Y I= $200 G= $250 X = $100.2Yarrow_forwardthe new equilibrium level of real GDP if government spending increases by $150? 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150? 19. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?arrow_forwardWhat effect an increase of government spending will have on the output equilibrium in the goods market? Explain using autonomous spending. please explainarrow_forward
- Which of the following statements regarding fiscal policy is correct? Select one: a. Expansionary fiscal policy (e.g. increasing the government deficit or reducing the surplus) always has a stabilising effect on the economy b. Just as a family worried about mounting debts should cut spending and save more, an economy should adopt austerity measures when its debt level is high to restore its public finances to balance c. In a recession, the aim of a government fiscal expansion is to over-ride the effects of automatic stabilisers d. In a downturn, unemployment benefits automatically increase government spending, and lower income levels reduce the amount of income tax that is paid. In a boom, unemployment benefits are reduced, decreasing government spending whilst more income tax revenue is collected. These are therefore automatic stabilisers.arrow_forwardWhich of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession? a. A cut in the marginal tax rate increases the incentives to find a job and work longer hours. b. Consumers will save a portion of a tax cut. c. The government may use the increase in expenditures on projects with little value, particularly, if it wishes to respond quickly. d. There is no evidence that tax cuts have been followed by increases in economic growth.arrow_forwardC = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?arrow_forward
- Should the government fight recessions with spending hikes rather than tax cuts ? Explain.arrow_forwardC = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Calculate the tax revenue to the government of this country when the economy remains in equilibrium. Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?arrow_forwardAn economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4 billion. The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.arrow_forward
- Which of the following is considered contractionary fiscal policy? A) Congress decreases the income tax rate. B) Congress decreases defense spending. C) Legislation removes a college tuition deduction from federal income taxes. D) The New Jersey legislature cuts highway spending to balance its budget.arrow_forwardGovernment spending in Robok is $140 billion, and its only tax is an income tax with a marginal tax rate of 0.2. a. The balance on the government's budget at a GDP level of $450 billion is a (Click to select) : of $ billion. b. The balance on the government's budget at a GDP level of $800 billion is a ( (Click to select) : of $ billion. C. At what level of GDP will the economy of Robok have a balanced budget? Robok will have a balanced budget at a GDP level of $ [ ]billion.arrow_forwardWhich of the following is carried out in an expansionary fiscal policy? a. Higher taxes and higher government expenditure b. Lower taxes and higher government expenditure c. Higher taxes and lower government expenditure d. Lower taxes and lower government expenditure.arrow_forward
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