Need help with D and E. 2. The economy in Country X is in a recession, with real gross domestic product (GDP)$100 billion below full-employment output. Country X produces cars and planes.a. Draw one correctly labeled production possibilities graph. Show a point thatrepresents fully employed and efficiently used resources on the graph and label it A.CarsCountry XPPBPlanesb. On your graph in part (a), label as Ca point representing the current state of theeconomy in Country X.c. Explain the following statement; the marginal propensity to consume is .75.equalthePer centeseof newTheMPCis+0incomeS PentConsumption rather than Saved.d. Assume that the government increases spending by $20 billion to stimulateeconomic activity. Assume that the marginal propensity to save is 0.25. Calculate themaximum total change in real GDP that could occur following the $20 billionincrease in government spending.Themax i mumto tal change in real GDPthat CouldOccur Wouldbee. Had the government lowered personal income taxes by $20 billion instead ofincreasing spending by $20 billion, would the maximum total change in real GDP begreater than, smaller than, or the same as the one calculated in part (b) ? Explain.

The government expenditure multiplier is a measure of how much a change in government spending…

2. The economy in Country X is in a recession, with real gross domestic product (GDP) $100 billion below full-employment output. Country X produces cars and planes. a. Draw one correctly labeled production possibilities graph. Show a point that represents fully employed and efficiently used resources on the graph and label it A. Country X Cars PP B Planes b. On your graph in part (a), label as Ca point representing the current state of the economy in Country X. c. Explain the following statement; the marginal propensity to consume is .75. The MPC is equal +0 the Per centese of new income S Pent Consumption rather than Saved d. Assume that the government increases spending by $20 billion to stimulate economic activity. Assume that the marginal propensity to save is 0.25. Calculate the maximum total change in real GDP that could occur following the $20 billion increase in government spending. The max i mum +o tyl Change in real GDP that Coud Occu Would be e. Had the government lowered personal income taxes by $20 billion instead of increasing spending by $20 billion, would the maximum total change in real GDP be greater than, smaller than, or the same as the one calculated in part (b) ? Explain.

2. The economy in Country X is in a recession, with real gross domestic product (GDP) $100 billion below full-employment output. Country X produces cars and planes. a. Draw one correctly labeled production possibilities graph. Show a point that represents fully employed and efficiently used resources on the graph and label it A. Country X Cars PP B Planes b. On your graph in part (a), label as Ca point representing the current state of the economy in Country X. c. Explain the following statement; the marginal propensity to consume is .75. The MPC is equal +0 the Per centese of new income S Pent Consumption rather than Saved d. Assume that the government increases spending by $20 billion to stimulate economic activity. Assume that the marginal propensity to save is 0.25. Calculate the maximum total change in real GDP that could occur following the $20 billion increase in government spending. The max i mum +o tyl Change in real GDP that Coud Occu Would be e. Had the government lowered personal income taxes by $20 billion instead of increasing spending by $20 billion, would the maximum total change in real GDP be greater than, smaller than, or the same as the one calculated in part (b) ? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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