Consider an economy in which the marginal propensity to consume is 0.8 and GDP is currently at 12,000. a) The government wishes to increase GDP to 13,000, and it is considering changing only one of its fiscal tools: 1. government purchases 2. taxes 3. transfer payments How much would the government have to change each of these fiscal policy tools to achieve its goal? (Use the simple spending multiplier for this part and below.)
Consider an economy in which the marginal propensity to consume is 0.8 and GDP is currently at 12,000. a) The government wishes to increase GDP to 13,000, and it is considering changing only one of its fiscal tools: 1. government purchases 2. taxes 3. transfer payments How much would the government have to change each of these fiscal policy tools to achieve its goal? (Use the simple spending multiplier for this part and below.)
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter30: Government Budgets And Fiscal Policy
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Problem 38CTQ: Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending...
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![Consider an economy in which the marginal propensity to
consume is 0.8 and GDP is currently at 12,000.
a) The government wishes to increase GDP to 13,000, and it is
considering changing only one of its fiscal tools:
1. government purchases
2. taxes
3. transfer payments
How much would the government have to change each of
these fiscal policy tools to achieve its goal? (Use the simple
spending multiplier for this part and below.)
b) Suppose instead that the government wishes to reduce GDP
to 10,000, and again, it is considering using only one of its three
available fiscal policy tools. How much would it change each of
these fiscal tools to achieve its goal?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8c8f63a5-6196-4680-83ca-72797339de09%2Fedbda4ad-6f9f-4a5a-ada0-3414756ff654%2Fyx0r0xb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider an economy in which the marginal propensity to
consume is 0.8 and GDP is currently at 12,000.
a) The government wishes to increase GDP to 13,000, and it is
considering changing only one of its fiscal tools:
1. government purchases
2. taxes
3. transfer payments
How much would the government have to change each of
these fiscal policy tools to achieve its goal? (Use the simple
spending multiplier for this part and below.)
b) Suppose instead that the government wishes to reduce GDP
to 10,000, and again, it is considering using only one of its three
available fiscal policy tools. How much would it change each of
these fiscal tools to achieve its goal?
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