Figure 41 Туре Frictional Current Rate 2.1 Structural 22 Cyclical 2.5 Using Okun's Law and the data in figure 41, if potential output is $550 billion and the marginal propensity to consume for this economy is equal to 80-percent, a proper fiscal policy response woulk be to: O. Increase taxes by $5.5 billion. O b. decrease government expenditures by $5.5 billion. Oc increase government expenditures by $11 billion. Od. decrease taxes by $11 billion.

Figure 41 Туре Frictional Current Rate 2.1 Structural 22 Cyclical 2.5 Using Okun's Law and the data in figure 41, if potential output is $550 billion and the marginal propensity to consume for this economy is equal to 80-percent, a proper fiscal policy response woulk be to: O. Increase taxes by $5.5 billion. O b. decrease government expenditures by $5.5 billion. Oc increase government expenditures by $11 billion. Od. decrease taxes by $11 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume an economy where the government embarks on an expansionary fiscal policy, explain the effect on equilibrium and interest rate if: a. There is a crowding out of the Private sector. b. The initial expansionary fiscal Policy was accompanied by an increase in money supply explain both senarios with the aid of diagrams
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Why does a $1 increase in government purchases lead to more than a $1 increase in income and spending? OA. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to a decrease in induced spending OB. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to a decrease in induced spending OC. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to an increase in induced spending OD. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to an increase in induced spending
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