2. The lowest level of the output gap during the Great Recession was -7.46% in July 2009. (a) Economists estimate the multiplier for the US economy to be 1.5. If this is true, what is x? (b) What would the percent change in government expenditure be to close this gap, assuming monetary policy is not being used?
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- 7) Suggest a policy mix to achieve the following objectives: a. Increase Y while keeping i constant. b. Decrease the fiscal deficit while keeping constant. What happens to i? To investment?4) Suppose an economy is producing real GDP of $600 billion. Potential GDP is equal to $540 billion, and the MPC is equal to 0.6. i)What kind of a gap (or problem) is this country experiencing? ii) What policy action do you suggest the government to take to eliminate the gap? State both the specific type of policy action and its size. Show your work for partial credit.Suppose the consumption function is C= $400 billion + 0.9 Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with Instructions: Enter your response as a whole number. (a) A $60 billion increase in government purchases? $ billion Instructions: Enter your responses rounded to one decimal place. (b) A $60 billion tax cut? $ billion (c) A $60 billion increase in income transfers? $ billion What will the cumulative AD shift be for (d) The increased government spending? $ billion (e) The tax cut? $ billion
- (a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is not at full employment, by how much should government spending…1. Country X has following data: C = 20 + 0.8Y4, I = 30, G = 40, Tx = 20, T, = 15, X = 60, M = 20 + 0.04Y, incoming year growth target is 600, All figures is billion. Please calculate: a. National income equilibrium! b. Consumption and saving equilibrium! c. Government income from tax! d. How much change in government consumption if they want to achieve growth target?1. In the Keynesian model, suppose that the economy has the following values : C = 100 + 0.75*Y G = 300 I = 200 NX = 0 (remember Y = GDP = C + I + G + NX) a) Solve for the level of equilibrium output in this economy. b) What is the MPC in this economy? What is the multiplier on government spending? (I want a specific number here, not a definition) c) Household savings is defined as income minus consumption (S = Y – C). What is the level of household savings in this economy? d) Suppose that households become nervous about the future of the economy and decide that they will consume less and save more money, so their new consumption function becomes C = 100 + 0.6*Y Solve for the new equilibrium level of output and calculate how much households end up saving. How has it changed from the level of savings in part c? e) How much does the government needs to increase its spending by to counteract the fall in economic output in this model?
- 6. What change in government spending (airports, police, teachers, roads, etc.) would reestablish full employment with price stability? 7. What change in taxes would achieve the same goal? Explain why it is different from the change in government and is the opposite sign. 8. Should we balance the budget in this situation? And why? Q4. Suppose that in the closed economy of Keynesia, consumption is given by C = 100 + 0.75(Y -T). Investment I is constant at 200, government purchases G are 160, and the government’s budget is balanced so G = T. Aggregate supply responds passively to changes in demand, so Y = C+I+G. a. What is the marginal propensity to consume? b. Use algebra to find the equilibrium value of Y, the equilibrium level of income? c. If government spending rises to 180 with no change in taxes, what will happen to the Keynesian equilibrium level of income? What is the government-expenditure multiplier AY/AG? d. If taxes increase to 180 with no change in government spending, what…Economics 1) Which of the following best describes the multiplier effect A an initial increase in interest rate leads to larger increase in GDB B An Initial increase in aggregate supply leads to larger increase in GDP C an initial increase in goverment income lead to larger increase in GDP D An Initial increase in injection lead to larger increase in GDP 2. the term business sysle refer to the A short term up and down in the economy B. short term up and down in the price level C. long term trend in the price level 2.The cost of rebuilding the Philippines after typhoon Haiyan could reach USD 5.8bn”, a senior official has said. Assume the government of Australia Department of Foreign Affairs and Trade provided a grant of USD 5.8 billion. Also assume that despite the hardships the Philippine families experienced, 15% was the beneficiary savings from the Australian grant. Further, assume all other factors remain constant.a. Calculate the total effect of the spending multiplier of the Australian government grant on the Philippine economy GDP growth. b. Examine the overall multiplier effect of the USD5.8 billion grant on the Philippine economy. Answer asap n correctly with proper typed explanation
- 4. A country’s consumer spending is defined by the following equation:Consumer spending = 365 + 0.75 (Disposable Income)a. Draw a diagram to represent this equation. b. Assuming no government, what will the Marginal Propensity to Save (MPS) in this country.c. What will be Consumer spending if disposable income in this country is 1000? d. If suddenly this country’s wealth increases, how do you think the equation might change.Also show it in a diagram.QUESTION 4 Suppose the real GDP in a fictional economy currently equals to 160 million USD, the potential real GDP equals to 180, and the government expenditures multiplier is 4. The government has to increase its expenditures by.... in order to bring back the economy to its long-run real GDP equilibrium.11. The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economic Stimulus Act of Act of 2009) that combined would deliver about $700 2008 and the American Recovery and Reinvestment billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if MPC in the United States is 0.5. Then calculate the resulting change in real GDP arising from the $700 billion in payments. 76177 b. Illustrate the effect on real GDP with the use of a graph depicting the income-expenditure equilib- rium. Label the vertical axis “Planned aggregate spending, AE Planned" and the horizontal axis "Real GDP." Draw two…