Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP:   Group of answer choices a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion. nothing is needed to bring the economy into full employment equilibrium. a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.

Q: Which of the following measures will enable the government to close a contractionary gap of -20,000…

A: Consumption analysis serves as a yardstick for assessing how scarce resources are used, the reason…

Q: Assume there is a decrease in the aggregate demand, if expansionary fiscal policy is being used, the…

A: Fiscal policy is the kind of policy using which government adjusts its spending levels and tax rates…

Q: A decrease in government purchases of $2 billion leads to an initial $1.1 billion decrease in…

A: Please find the answer below.

Q: Assume the marginal propensity to consume (MPC) is 0.6 and the government increases taxes by $30…

A: In Keynesian macroeconomics, the changes in aggregate demand in the economy are able to affect the…

Q: Assume a closed economy with no government. Suppose that autonomous consumption equals $400, planned…

A: Autonomous consumption = $400 Initial Planned investment = $500 mpc = 0.9 Final Planned investment =…

Q: or more: a. Households smooth their income to match their volatile consumption. b. Borrowing allows…

A: OPTION C IS WRONG BECAUSE  Households react to shocks by saving, borrowing, and sharing to smooth…

Q: If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, the mpc…

A: Here, given information is, Real output: 10,000 Income-expenditure multiplier: 10 MPC: 0.9…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80…

A: A negative output gap also known as recessionary output gap is when the long run output exceeds the…

Q: Given that the full employment output is $2,500 and the equilibrium real GDP is $2,800, and the MPS…

A: Tax multiplier: - it is a fraction that shows the magnitude of the change in national income due to…

Q: s shown in Exhibit 2, this economy is in macro equilibrium at:   Group of answer choices $2…

A: The model that includes Consumption and Investment is referred as the Aggregate Expenditures Model.…

Q: Which of the following statements is true?

A: Government spending refers to the amount of expenditure carried out by the government on the…

Q: Suppose the Malaysian economy is in equilibrium at $1400 billion real GDP with a recessionary gap.…

A: Given; Equilibrium level of real GDP= $1400 billion Marginal Propensity to Consume; MPC=0.63…

Q: If the MPC In an economy Is 0.80, government could close a recessionary expenditure gap of $100…

A: Meaning of Money Multiplier: As from the word, the money multiplier refers to the situation under…

Q: If investment and consumption expenditures fall and cause GDP to fall, what is an appropriate fiscal…

A: Fiscal policy is implemented by the government in the form of change in taxes and spending. Monetary…

Q: suppose the government wishes to illuminate recessionary GAP of 100 billion and the  MPC is .75. How…

A: The multiplier shows the change in real GDP as a result of a change in the autonomous expenditure.…

Q: If the MPC in an economy is 0.80, government could shift the aggregate demand curve leftward by $48…

A: The fiscal and monetary policies are used by the governments to control the macroeconomic variables…

Q: Keynesians believe that the multiplier effect of an increase in government spending will be that of…

A: Answer to the last two parts are given:

Q: In Keynesian economic theory, a recessionary gap causes a depletion of inventories. occurs if total…

A: An economy is at full employment when rate of actual spending is equal to full employment GDP.

Q: The amount by which equilibrium real GDP exceeds full-employment GDP is known as (2pts) Question 12…

A: The amount by which equilibrium real GDP exceeds full-employment GDP is known a ____________________

Q: Suppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The…

A: GDP: It means the monetray value of finished goods and services that are produced in the country.

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

A: *Answer:

Q: If the marginal propensity to consume is 0.6, then according to the Keynesian Cross, the tax…

A: Answer to the question is as follows :

Q: As you know equilibrium occurs where Y = AE. That is, where aggregate output equals planned…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Assume that the economy is in a severe recession with a high level of under-utilized capacity. The…

A: HI Student, as per the guideline, we are providing answer for the first question. Kindly post the…

Q: The Government increases spending by TL 8 billion to prevent the economy from sliding into a…

A: An initial increase in spending results in a multiple times increase in aggregate expenditure is…

Q: Suppose that the national economy is experiencing a recession with an estimated recessionary gap of…

A: A recessionary gap refers to the gap that arises when the actual real GDP is lesser than the…

Q: Suppose the MPC is 0.60. Assume there are no crowding out or investment accelerator effects. Please…

A: Given, MPC = 0.60

Q: What happens to aggregate output if both taxes and government spending are lowered by $300 billion…

A: A multiplier is a proportionality factor that measures how much endogenous variable changes in…

Q: Assume that a hypothetical economy with an MPC of 0.75 is experiencing severe recession. By how much…

A: Given:- MPC=0.75 Rise in aggregate demand=$35 billion To calculate:- Rise in government spending=?…

Q: The economy is in a recession. The government enacts a policy to increase spending by $4 billion.…

A: The correct answer is given in the second step.

Q: If economic predictions showed the U.S. GDP to be decreasing by approximately $500 billion next…

A: We will answer the first question only. Please resubmit the question with any other parts you'd like…

Q: AS AD, AD Y, Y=Y¡ Recessionary gap Refer to the diagram shown below. Suppose AS curve is horizontal…

A: Aggregate demand is a sum of consumption spending, investment spending, government purchases and net…

Q: Suppose that an economy is in equilibrium at a level of output of $2000 million. Suppose further…

A: In an economy, a full employment level is one at which an economy can produce the potential level of…

Q: If the MPC in an economy is 0.6, government could shift the aggregate demand curve rightward by $30…

A: MPC is the marginal propensity to consume. It is that part of income or increase in income which is…

Q: (Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with…

A: Multiplier = 1 / (1- MPC) When government purchases decreases by $10 billion, For MPC = 0.9 Real GDP…

Q: The equilibrium level of real GDP is Rs 1,000 billion, the full employment level of real GDP is Rs…

A: Marginal propensity to consume (MPC) : it can be defined as change in consumption level due to…

Q: Suppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The…

A: It is given that MPC=0.8 Current Real GDP = $ 18 trillion The government wants to increase real GDP…

Q: Assume the current equilibrium level of income is $200 billion as compared to the full-employment…

A: MPC is the marginal propensity to consume which is the proportion of change in income spent on…

Q: In an attempt to stimulate the economy, the Government has announced a $23.9 billion increase in its…

A: When aggregate demand and supply are equal of goods then goods market is said to be in equilibrium.…

Q: which of the following is correct about the effects of tax Select one: a. Taxes affect the IS curve,…

A: 1) Tax is a compulsory payment by the citizen to the state. Taxes do impact the IS curve but not the…

Q: Suppose that an economy is in equilibrium at a level of output of $600 million. Suppose further that…

A: In an economy, a full employment level is one at which an economy can produce the potential level of…

Q: Assume a contradictory gap of $4 trillion. With MPC equal to 0.75, what would be the recommended…

A: The use of government spending and tax policies to influence economic conditions, especially…

Q: if the MPC in an economy is .80 government could shift the aggregate demand curve leftward by $48…

A: Answer: Correct option: (A) increasing taxes by $12 billion Explanation: If the government increases…

Q: If an economy is in equilibrium when national income is $1000, and the level of autonomous…

A: The marginal propensity to consume is a metric that quantifies induced consumption, the concept that…

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: If government purchases increase by $20 billion and aggregate demand shifts rightward by $30 billion…

A: the MPC for this economy is 0.33

Q: If the MPC in an economy is .8, the increase in real GDP can occur (aggregate demand curve can shift…

A: Multiplier = 1/ [1 - MPC] The required increase in government spending = Total increase in aggregate…

Q: Which component of spending was the largest contributing factor to the downturn in spending during…

A: Investment was the largest contributing factor to the downturn in spending during the double-dip…

Q: Suppose an economy is initially in equilibrium at its potential output level. As a result of an…

A: Government spending multiplier: - it is a fraction that shows the magnitude of the change in…