EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 36, Problem 5DQ
To determine
The relation between Laffer curve and supply side economics.
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Students have asked these similar questions
QUESTION 16
If the marginal propensity to save is 0.1, the marginal propensity to import is 0.1 and the marginal tax rate is 0.2, how much would consumption increase if income
rises by £8billion?
O a. 4.8
O b. 13.3
O c. 3.2
O d. 20
4
5. Refer to the data in the table that
accompanies problem 2. Suppose that
the present equilibrium price level and
level of real GDP are 100 and $225, and
that data set B represents the relevant
aggregate supply schedule for the
economy. LO12.6
a. What must be the current amount of
real output demanded at the 100 price
level?
b. If the amount of output demanded
declined by $25 at the 100 price level
shown in B, what would be the new
equilibrium real GDP? In business
суcle
economists call this change in real
terminology,
what
would
GDP?
Which of the following changes in personal income tax would lead to the smallest increase in
consumption?
O a.
O b. a $15 000 decrease in taxes, if MPC equals
0.6
O c.
a $30 000 decrease in taxes, if MPC equals
0.25
Oe.
a $20 000 decrease in taxes, if MPC equals
0.5
O d. a $12 000 decrease in taxes, if MPC equals
0.75
a $10 000 decrease in taxes, if MPC equals
0.2
Chapter 36 Solutions
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- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?arrow_forward9. Refer to the accompanying table in answering the questions that follow: L011.8 (1) Possible Levels (3) Aggregate Expenditures (2) Real Domestic (C, + 1, + X, + G), Millions of Employment, Output, Millions Millions 90 $500 $520 100 550 560 110 600 600 120 650 640 130 700 680 a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? What will be the consequence of this gap? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or the recessionary expenditure gap? What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? What is the multiplier in this example? c. Assuming that investment, net exports,…arrow_forwardWhat would be the effect of an increase in taxes on a graph showing aggregate demand and short and long-run aggregate supply that is initially in long-run equilibrium? The short-run effect of an increase in taxes will be for the O A. aggregate demand curve to shift up. B. aggregate demand curve to shift down. C. short-run aggregate supply curve to shift left. O D. short-run and long-run aggregate supply curves to shift right. The new short-run equilibrium will be where O A. the new aggregate demand curve intersects the original long-run aggregate supply curve. OB. the original aggregate demand curve intersects the original short-run aggregate supply curve. O C. the new aggregate demand curve intersects the original aggregate demand curve. D. the new aggregate demand curve intersects the original short-run aggregate supply curve.arrow_forward
- 2./The accompanying diagram shows the current mac- roeconomic situation for the economy of Brittania; real GDP is Y, and the aggregate price level is P. You have been hired as an economic consultant to help the economy move to potential output, Yp Aggregate price level LRAS SRAS P1 E1 AD Potential Yp Y, output Real GDP a. Is Brittania facing a recessionary or inflationary gap? b. Which type of fiscal policy-expansionary or contractionary-would move the economy of Brittania to potential output, Yp? What are some examples of such policies? c. Illustrate the macroeconomic situation in Brittania with a diagram after the successful fiscal policy has been implemented.arrow_forwardWhich of the following statements is not true? A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments. O Automatic stabilizers act to moderate business cycles primarily through the personal income and consumption channels. O Other things equal, the steeper the slope of the aggregate supply curve, the less effective will be the expansionary fiscal policy. When aggregate expenditure (AE) exceed Real GDP, inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.arrow_forward9. True or false? If the statement is false, explain why: LO4 a. An internally held public debt is like a debt of the left hand owed to the right hand. b. The Federal Reserve and federal government agencies hold more than half the public debt. c. As a percentage of GDP, the federal debt held by the public was smaller in 2010 than it was in 1990. d. As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced industrial nations.arrow_forward
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