Homework Help is Here – Start Your Trial Now!
Business
Economics
An economy is in equilibrium at a real GDP of 750, but current estimates put potential output at Yp = 700. a) Answer the following fill-in the blank question. When Y = 750 and Yp = 700 there is a (Select One) gap and the size of the gap is equal to 0 (Select One) inflationary b) Answer the following fill-in the blank recessionary Note: Keep as much precision as possible design calculations. Your final answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE is Oand the multiplier is 0 which means that G must be decreased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 0

An economy is in equilibrium at a real GDP of 750, but current estimates put potential output at Yp = 700. a) Answer the following fill-in the blank question. When Y = 750 and Yp = 700 there is a (Select One) gap and the size of the gap is equal to 0 (Select One) inflationary b) Answer the following fill-in the blank recessionary Note: Keep as much precision as possible design calculations. Your final answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE is Oand the multiplier is 0 which means that G must be decreased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 0

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question
An economy is in equilibrium at a real GDP of 750, but current estimates put potential output at Yp = 700. a) Answer the following fill-in the blank question. When Y = 750 and Yp = 700 there is a (Select One) gap and the size of the gap is equal to 0 (Select One) inflationary b) Answer the following fill-in the blank recessionary Note: Keep as much precision as possible design calculations. Your final answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE is Oand the multiplier is 0 which means that G must be decreased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 0
Transcribed Image Text:An economy is in equilibrium at a real GDP of 750, but current estimates put potential output at Yp = 700. a) Answer the following fill-in the blank question. When Y = 750 and Yp = 700 there is a (Select One) gap and the size of the gap is equal to 0 (Select One) inflationary b) Answer the following fill-in the blank recessionary Note: Keep as much precision as possible design calculations. Your final answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE is Oand the multiplier is 0 which means that G must be decreased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 0
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS