A decrease in government purchases of $2 billion leads to an initial $1.1 billion decrease in withdrawals. a. In this case MPW is MPC is , and the spending multiplier in this economy is . Enter your responses for marginal propensities and multiplier values rounded to 2 decimal places. b. With this change in government purchases the AD curve shifts to the (Click to select) v by $ of the curve shift rounded to 1 decimal place. Do not put a minus sign in your answer. billion. Enter your response for the size C. As a result of this shift the equilibrium price level will (Click to select) v and equilibrium real output will (Click to select) v

A decrease in government purchases of $2 billion leads to an initial $1.1 billion decrease in withdrawals. a. In this case MPW is MPC is , and the spending multiplier in this economy is . Enter your responses for marginal propensities and multiplier values rounded to 2 decimal places. b. With this change in government purchases the AD curve shifts to the (Click to select) v by $ of the curve shift rounded to 1 decimal place. Do not put a minus sign in your answer. billion. Enter your response for the size C. As a result of this shift the equilibrium price level will (Click to select) v and equilibrium real output will (Click to select) v

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is a tax-cut that increases your Disposable Income by $3,400, which you intend to save $510. a. Calculate the MPC. b. Interpret this MPC. (What does it mean? Define MPC and describe in this context.)c. What is the resulting fiscal multiplier? d. Interpret the multiplier and describe the multiplier effect. e. Find the total change to the economy from this tax change.
Given an economy is currently producing at $1.2T rGDP, natural rGDP is $1.3T, and the MPC is 0.9, then the multiplier for increases in aggregate expenditures is: 10 A (whole number, no decimals). This means the federal government should increase its expenditures by A (whole number) billion dollars.
The tax cuts of 2017 increased the 2018 disposable income of households by roughly $200 billion. If the MPC were 0.65, Instructions: Enter your responses as a whole number. a. how much of this windfall was initially saved? $ billion b. how much AD stimulus resulted over time after all multiplier effects? $ billion When I work through (b), I get the answer of 1300 billion, but it state it is incorrect.
Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its economy in each of the following scenarios. To stimulate the economy already in a serious recession, the government spends a total of $700 million to send each person a stimulus check of $600. The stimulus check is either mailed to the taxpayer or in the form of a tax credit. It is seen as a fiscal policy of tax reduction. Lowering or reducing tax burdens raises family disposable income, which boosts consumption and saving among consumers and enterprises. Through the use of a tax multiplier, it encourages people and businesses to invest or spend more. It causes an increase in demand, which motivates firms to spend more and recruit more people, resulting in even more demand. The MPC influences the output via the multiplier through this vicious loop. To stimulate the economy already in a serious recession, the government spends a total of $700 million to construct nationwide highspeed…
Theoretically, a decline in G such as the one in the first question leads to a change in equilibrium Y, Ye. First, give the simple equation for how much a change in autonomous government spending changes Ye. Second, we expect that the fall in G will lead to a fall in Ye that is even greater in dollars than the change in G and this will be due to the multiplier effect. Please explain how this multiplier effect (not the multiplier itself but rather the process that shows how spending ripples down through the economy) where a rise in G of $100 billion leads to a change in Ye of more than $100 billion. Once done, answer the following: if the size of the MPS rises as people become more concerned about the possible coming recession what will happen to the amount by which Ye changes with a given rise in G? Explain in words why this change makes sense.
An economy has no imports and no income taxes. An increase in autonomous expenditure of $5 trillion increases equilibrium expenditure by $50 trillion. Calculate the multiplier and the marginal propensity to consume. What happens to the multiplier if an income tax is introduced? >>> Answer to 2 decimal places. The multiplier is
Initially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.Then the government decides to increase its spending to $2.7 trillion. a) What is the value of the spending multiplier? b) Compute the new equilibrium level of output. Assume that the marginal propensity to consume is 0.7 (MPC=0.7).
If the consumption function is C= $800 billion + 0.8 Y, Instructions: In part a, round your response to one decimal place. In parts b-d, enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. what is the MPC? b. how large is autonomous consumption? billion c. how much do consumers spend with incomes of $4 trillion? billion d. how much do they save? billion 100%
Suppose that the MPC in North Laurasia is 0.6. a. What is the spending multiplier for the North Laurasian economy? Instructions: Round your answer to one decimal place. b. If the government spends an extra $1,000, by how much with the economy grow? Instructions: Enter your answer with a whole number.
There is an inflationary gap of $200 billion in the economy. The MPC is 90%. What is the MPS [Select] and the Government Spending Multiplier [Select] the Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would spending? By how ? If the Government decided to taxes? What is and by how much
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What will be the impact on the spending multiplier if the marginal propensity to save (MPS) increases? A.The spending multiplier will increase. B.The spending multiplier will remain unaffected. C.The spending multiplier will decrease. D.The impact on the spending multiplier cannot be determined.