Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession. Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers as a whole number. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? 24 billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut = $ billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spending by $ billion Increase taxes by $ | billion
Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession. Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers as a whole number. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? 24 billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut = $ billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spending by $ billion Increase taxes by $ | billion
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
Related questions
Question
![Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession.
Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers
as a whole number.
a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion?
billion
How large a tax cut would be needed to achieve the same increase in aggregate demand?
Tax cut = $
billion
b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal
without changing the amount of outstanding debt.
Increase government spending by $
billion
Increase taxes by $
billion](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe10f4b17-dfc6-4e73-88ce-4e06340779eb%2F1c6d9772-e6de-4ab9-9eab-5188a003d0e3%2Fpqaq6yq_processed.png&w=3840&q=75)
Transcribed Image Text:Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession.
Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers
as a whole number.
a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion?
billion
How large a tax cut would be needed to achieve the same increase in aggregate demand?
Tax cut = $
billion
b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal
without changing the amount of outstanding debt.
Increase government spending by $
billion
Increase taxes by $
billion
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
![Macroeconomics](https://www.bartleby.com/isbn_cover_images/9781337617390/9781337617390_smallCoverImage.gif)