Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. Ifthe current actual Real GDP is at $300 million,.government spending bywould bring the economy tofull employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $54,054,054.05 d) increasing: $54,054,054.05

Approach to solving the question: To calculate the change in government spending needed to reach…

Answered: Assume that marginal propensity to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the president is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP? There is a $20 billion increase in equilibrium GDP. There is a $20 billion decrease in equilibrium GDP. There is a $15 billion increase in equilibrium GDP. There is a $15 billion decrease in equilibrium GDP.
The economy is experiencing a contraction (recessionary gap) of $400 billion. What government spending stimulus would you recommend to move the economy back to full employment if the MPC is 0.75? Would your policy be any different if the MPC were 0.66?
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If the recessionary gap is $ 200 billion and the multiplier is 2, what is the increase in aggregate spending needed to bring the economy to full employment? a)$300 billion b)$ 600 billion c)$200 billion d) $66.6 billion
An inflationary gap is the amount by which aggregate expenditures ____ the amount required to achieve full-employment equilibrium GDP. A) exceed B) equal C) fall short of D) are greater than.
Complete the statements and then calculate the change in consumption. Options: disposable income marginal propensity to save. marginal propensity to consume. saving. wealth. The consumption function shows the relationship between consumption spending and ______ The slope of the consumption function is the______ Changes in consumption can be predicted by multiplying the change in ______ by the _______ If the MPC=0.80MPC=0.80 and disposable income increases by $1000$1000, then consumption will increase by what amount? Assume that there is no multiplier effect.
Assume an MPC of 0.9. The change in total spending for the economy as a result of a $100 billion new government spending injection would be: A) $90 billion B) $80 billion C) $900 billion D) $800 billion
Suppose that equilibrium output in a closed economy is 1,680, consumption 1,260 and investment is 120. The marginal tax rate is zero. The marginal propensity to consume out of national income is 0.75. The level of government expenditure (G) is 1260 120 300
Suppose actual real GDP is $7.87 trillion, potential real GDP is $14.36 trillion, and the marginal propensity to consume is 0.61. If we ignore price effects, by how many trillions of dollars should the government change its lump sum taxes to fix the gap? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
Assume taxes are zero and an economy has a consumption function of C = 0.64 (Yd) + $250.19. What is the marginal propensity to save for this economy? Round your answer to two digits after the decimal.
Marginal propensity to consume = 0.8; In an economy with tax rate = 0.25 and Marginal propensity to import = 0.10, how much would an increase of 250 units in autonomous spending increase the equilibrium income level?
Suppose the government raised taxes by $100,000 and simultaneously raised spending by $100,000. If the marginal propensity to consume is 0.65, what is the net effect on Gross Domestic Product? (use a negative number if GDP would go down, and a positive number if GDP would go up) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

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