Consider an economy in which the current level of GDP is 500B, the government multiplier is 2, the marginal tax rate is 10%, the current budget deficit is 5B. If the government wants to increase GDP increase to 525B, it can increase government spending G by _ Billion. The budget deficit will increase to _ _Billion. Round your answers to the nearest 2 decimal points. Do not include a dollar sign or billion indicator B. Hint and note: This problem is looking for a change in government spending (A) and the new budget deficit (B). To help you out, the budget deficit is G-T. The change in the deficit in this problem will be A G-.10AY, where AG is the change in government spending and AY is the change in GDP. When recording the new budget, don't forget to include the original budget deficit!
Consider an economy in which the current level of GDP is 500B, the government multiplier is 2, the marginal tax rate is 10%, the current budget deficit is 5B. If the government wants to increase GDP increase to 525B, it can increase government spending G by _ Billion. The budget deficit will increase to _ _Billion. Round your answers to the nearest 2 decimal points. Do not include a dollar sign or billion indicator B. Hint and note: This problem is looking for a change in government spending (A) and the new budget deficit (B). To help you out, the budget deficit is G-T. The change in the deficit in this problem will be A G-.10AY, where AG is the change in government spending and AY is the change in GDP. When recording the new budget, don't forget to include the original budget deficit!
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
am. 130.
Transcribed Image Text:Consider an economy in which the current level of GDP is 500B, the government multiplier is 2, the
marginal tax rate is 10%, the current budget deficit is 5B.
If the government wants to increase GDP increase to 525B, it can increase government spending G by _
Billion. The budget deficit will increase to _
_Billion.
Round your answers to the nearest 2 decimal points. Do not include a dollar sign or billion indicator B.
Hint and note: This problem is looking for a change in government spending (A) and the new budget
deficit (B). To help you out, the budget deficit is G-T. The change in the deficit in this problem will be A
G-.10AY, where AG is the change in government spending and AY is the change in GDP. When
recording the new budget, don't forget to include the original budget deficit!
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