Assume that the federal government is attempting to counter a negative shock through fiscal policy. The federal government increases government spending by $350 billion. As a result of this policy change, the net change in total economic activity (including the increased government spending) is a decrease of $25 billion. Which of the following is most likely to be true? O the multiplier effect is larger than any crowding out effect O crowding out is not present O the increase in government spending led to a substantial increase in exports O the government has a lot debt already and is likely to default

Assume that the federal government is attempting to counter a negative shock through fiscal policy. The federal government increases government spending by $350 billion. As a result of this policy change, the net change in total economic activity (including the increased government spending) is a decrease of $25 billion. Which of the following is most likely to be true? O the multiplier effect is larger than any crowding out effect O crowding out is not present O the increase in government spending led to a substantial increase in exports O the government has a lot debt already and is likely to default

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 6 on4m21 3 Tax Revenue B Tax Size Refer to Figure 8-23. If the economy is at point A on the curve, then a small increase in the tax rate will O increase the deadweight loss of the tax and increase tax revenue. O increase the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and increase tax revenue. O decrease the deadweight loss of the tax and decrease tax revenue.
Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by: O increasing government spending such that aggregate expenditures are increased. O raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased. O decreasing government spending such that aggregate demand is reduced. lowering average tax rates such that aggregate supply is increased. O increasing transfer payments such that aggregate expenditures decline.
10. Crowding out effect Suppose economists observe that an increase in government spending of $13 billion raises the total demand for goods and services by $65 billion. If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be Now suppose the economists allow for crowding out. Their new estimate of the MPC would be than their initial one.
QUESTION 10 The multiplier effect demonstrates that: O equal increases in government spending and taxes do not change the equilibrium GDP equal increases in government spending and taxes reduce the equilibrium GDP equal increases in government spending and taxes increase the equilibrium GDP. taxes have a stronger effect upon equilibrium GDP than do government purchases. government purchases have a stronger effect upon equilibrium GDP than do taxes. Click Save and Submit to save and submit. Click Save All Answers to save all answers. SA
No written by hand solution
Question 25 Which of the following is true regarding the simple tax multiplier? I has the same sign but larger magnitude than the simple fiscal multiplier. O It has the same sign but lower magnitude than the simple fiscal multiplier. O t has the opposite sign and lower magnitude than the simple fiscal multiplier. It has the opposite sign and a larger magnitude than the simple fiscal multiplier.
7. Problems and Applications Q7 Suppose economists observe that an increase in government spending of $14 billion raises the total demand for goods and services by $42 billion. If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be Now suppose the economists allow for crowding out. Their new estimate of the MPC would be than their initial one.
2. The multiplier effect of a change in government purchases Consider a hypothetical closed economy in which households spend $0.80 of each additional dollar they earn and save the remaining $0.20. The marginal propensity to consume (MPC) for this economy is, and the spending multiplier for this economy is ▼. Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to . This decreases income yet again, causing a second change in consumption equal to .The total change in demand resulting from the initial change in government spending is The following graph shows the aggregate demand curve (AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD₂) after the spending multiplier effect takes place. Hint: Be sure that the new aggregate demand…
3
Don't use Ai. Answer in step by step with explanation.
Refer to the accompanying table for Waxwania. Government Expenditures, G Tax Revenues, T Real GDP $190 100 $500 190 120 600 190 140 700 190 160 800 190 180 900 a. What is the marginal tax rate in Waxwania? ____percent --The average tax rate? _____percent b. Suppose Waxwania is producing $600 of real GDP, whereas the potential real GDP (or full-employment real GDP) is $700.-How large is its budget deficit? $____ -Its cyclically adjusted budget deficit? $____ -Its cyclically adjusted budget deficit as a percentage of potential real GDP?________ percent
#17