Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its economy in each of the following scenarios. To stimulate the economy already in a serious recession, the government spends a total of $700 million to send each person a stimulus check of $600. The stimulus check is either mailed to the taxpayer or in the form of a tax credit. It is seen as a fiscal policy of tax reduction. Lowering or reducing tax burdens raises family disposable income, which boosts consumption and saving among consumers and enterprises. Through the use of a tax multiplier, it encourages people and businesses to invest or spend more. It causes an increase in demand, which motivates firms to spend more and recruit more people, resulting in even more demand. The MPC influences the output via the multiplier through this vicious loop. To stimulate the economy already in a serious recession, the government spends a total of $700 million to construct nationwide highspeed internet infrastructure so that all areas of the country, especially the rural areas will have highspeed internet service
Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its economy in each of the following scenarios. To stimulate the economy already in a serious recession, the government spends a total of $700 million to send each person a stimulus check of $600. The stimulus check is either mailed to the taxpayer or in the form of a tax credit. It is seen as a fiscal policy of tax reduction. Lowering or reducing tax burdens raises family disposable income, which boosts consumption and saving among consumers and enterprises. Through the use of a tax multiplier, it encourages people and businesses to invest or spend more. It causes an increase in demand, which motivates firms to spend more and recruit more people, resulting in even more demand. The MPC influences the output via the multiplier through this vicious loop. To stimulate the economy already in a serious recession, the government spends a total of $700 million to construct nationwide highspeed internet infrastructure so that all areas of the country, especially the rural areas will have highspeed internet service
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Explain how MPC and the multiplier effect would impact a government’s attempt to stimulate its economy in each of the following scenarios.
- To stimulate the economy already in a serious recession, the government spends a total of $700 million to send each person a stimulus check of $600.
The stimulus check is either mailed to the taxpayer or in the form of a tax credit. It is seen as a fiscal policy of tax reduction. Lowering or reducing tax burdens raises family disposable income, which boosts consumption and saving among consumers and enterprises. Through the use of a tax multiplier, it encourages people and businesses to invest or spend more. It causes an increase in
- To stimulate the economy already in a serious recession, the government spends a total of $700 million to construct nationwide highspeed internet infrastructure so that all areas of the country, especially the rural areas will have highspeed internet service.
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