2020) Nominal Rasi (1) (2) (3) (4) Total (5) Aggregate Production C X. Expenditures (Real GDP) C++X Column (5) below represents aggregate expenditures (AE-C+I+G-X) for an economy when there is no government spending or taxing (G-T-50) and Real GDP-PI-DI (6) Aggregate Expenditures C+1₂+X+G (7) After-tax Consumption Caft (8) Aggregate Expenditures Cafe+I+X+G $ $ $100 $100 $ 80 $0 $180 S S $ $200 $160 $80 $0 $240 S S $ $300 $220 $ 80 $0 $300 $400 S $ $280 $ 80 SO $360 $ $500 $340 $ $ $ 80 $0 $420 $ $600 $400 $ 80 $0 $ 480 $ S $ $700 $460 $ 80 $0 $540 S S S III. iv. What is the equilibrium level of GDP (where TP-AE) with no government spending or taxing? Suppose the government now spends $80 billion at each level of GDP and taxes remain at zero. Now fill in the new AE in column (6) above. What is equilibrium GDP (where TP-AE) with this level of government spending? Calculate the marginal propensities to consume and marginal propensity to save. MPC MPS- Calculate the government spending multiplier (mc)- mc-1/(1-MPC) AGDP/AG Now suppose that in addition to the $80 billion of G, a lump-sum tax (T) of $200 is imposed. Using this new information and the MPC above, fill in the after-tax consumption (Can) in column (7). Use this to calculate the new level of AE in column (8). ii. What is equilibrium GDP (where TP AE) with this level of G and T? Calculate the tax multiplier (mr)= mr MPC/MPS = AGDP/AT
2020) Nominal Rasi (1) (2) (3) (4) Total (5) Aggregate Production C X. Expenditures (Real GDP) C++X Column (5) below represents aggregate expenditures (AE-C+I+G-X) for an economy when there is no government spending or taxing (G-T-50) and Real GDP-PI-DI (6) Aggregate Expenditures C+1₂+X+G (7) After-tax Consumption Caft (8) Aggregate Expenditures Cafe+I+X+G $ $ $100 $100 $ 80 $0 $180 S S $ $200 $160 $80 $0 $240 S S $ $300 $220 $ 80 $0 $300 $400 S $ $280 $ 80 SO $360 $ $500 $340 $ $ $ 80 $0 $420 $ $600 $400 $ 80 $0 $ 480 $ S $ $700 $460 $ 80 $0 $540 S S S III. iv. What is the equilibrium level of GDP (where TP-AE) with no government spending or taxing? Suppose the government now spends $80 billion at each level of GDP and taxes remain at zero. Now fill in the new AE in column (6) above. What is equilibrium GDP (where TP-AE) with this level of government spending? Calculate the marginal propensities to consume and marginal propensity to save. MPC MPS- Calculate the government spending multiplier (mc)- mc-1/(1-MPC) AGDP/AG Now suppose that in addition to the $80 billion of G, a lump-sum tax (T) of $200 is imposed. Using this new information and the MPC above, fill in the after-tax consumption (Can) in column (7). Use this to calculate the new level of AE in column (8). ii. What is equilibrium GDP (where TP AE) with this level of G and T? Calculate the tax multiplier (mr)= mr MPC/MPS = AGDP/AT
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Just answer the chart and the questions provided in the picture
(Base (Base Yr
Yr =2020)
Nominal
Rasi
(1)
(3)
(4)
Total
Production
с
Xa
Aggregate
Expenditures
(Real GDP)
C++X
14.0
Column (5) below represents aggregate expenditures (AE-C+1₂+G=X) for an economy when there is no government spending
or taxing (G-T-50) and Real GDP-PI-DI
(5)
(6)
Aggregate
(8)
(7)
After-tax
Consumption
Aggregate
Expenditures
Caft
Caft+I+X+G
Expenditures
$100
$100
$80
$0
$180
$
$200
$160
$ 80
$0
$240
S
C+1₂+X+G
$
S
$300
$220
$
$
$ 80
$0
$300
$
$400
$280
$
$
$ 80
SO
$360
$
$500
$340
$ 80
$0
$420
$
$
$
$600
$400
$ 80
$ 0
$480
$
S
$
$700
$460
$ 80
$0
$540
$
S
S
i.
What is the equilibrium level of GDP (where TP-AE) with no government spending or taxing?
Suppose the government now spends $80 billion at each level of GDP and taxes remain at zero.
Now fill in the new AE in column (6) above.
ii.
What is equilibrium GDP (where TP=AE) with this level of government spending?
iii.
MPS-
Calculate the marginal propensities to consume and marginal propensity to save.
MPC-
iv.
Calculate the government spending multiplier (mc) -
mg -1/(1-MPC) = AGDP/AG
Now suppose that in addition to the $80 billion of G, a lump-sum tax (T) of $200 is imposed.
Using this new information and the MPC above, fill in the after-tax consumption (Caft) in column (7).,
Use this to calculate the new level of AE in column (8).
ii.
What is equilibrium GDP (where TP-AE) with this level of G and T?
Calculate the tax multiplier (mr) =
MT MPC/MPS - AGDP/AT
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