If the marginal propensity to consume was 0.7, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Enter your responses rounded to one decimal place. a. A tax increase. $ b. A government spending cut. $ c. A cut in income transfers. $ billion billion billion

If the marginal propensity to consume was 0.7, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Enter your responses rounded to one decimal place. a. A tax increase. $ b. A government spending cut. $ c. A cut in income transfers. $ billion billion billion

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

Macmillan Learning . Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion, and specify decreases as a negative number. By how much will government spending change? change in government spending: S What is the resulting change in the equilibrium level of real GDP? change in equilibrium level of real GDP: $ billion billion
An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let's say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume the MPC equals .80. How much will the tax increase be?
d. Now G assumes its original value of G = 800. Congress decreases the tax rate from (1/2) to (1/4). i) Use a model to sketch the effect of the decrease in the tax rate when the price level is held constant. ii) What is the new marginal propensity to consume? iii) Calculate the new equilibrium level of income.
Suppose that an economy is in equilibrium at a level of output of $600 million. Suppose further that the full employment level output is $2000 million. What can the President along with Congress do in order to attain the full employment output? Group of answer choices Increase the taxes. Decrease the taxes. Sell government securities. Decrease the government spending.
Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. If the current actual Real GDP is at $300 million,. government spending by would bring the economy to full employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $ 54,054,054.05 d) increasing: $54,054,054.05
Please answer fast
When the Federal government takes action to change taxes and spending to stimulate the economy such policy is: A) Discretionary B) Passive C) Automatic D) Nondiscretionary
QUESTION 25 A tax cut shifts the aggregate demand curve the farthest if a. the MPC is large and if the tax cut is temporary b. the MPC is large and if the tax cut is permanent c. the MPC is small and if the tax cut is permanent d. the MPC is small and if the tax cut is temporary
Question 34 If your marginal propensity to consume is 0.6 and you get an additional $600 in income, you would spend ______ on consumption. $200 $240 $360 $1,000 $1,500
None
The government spends an additional $668 billion and the marginal propensity to consume is 79%. How much will GDP increase due to this additional government spending? Enter your answer in billions and round to two decimal places.
The economy of Newland is in short-run macroeconomic equilibrium. The current real output is $400 billion, and the full employment output is $500 billion. The marginal propensity to consume is 0.8. (a) Is the economy experiencing a recessionary output gap or an inflationary output gap? Explain. (b) Assume Newland’s government is considering taking action to close the output gap identified in part (a). (i) Calculate the minimum change and indicate the direction of change in government spending required to shift the aggregate demand curve to close the output gap. Show your work. (ii) If instead Newland’s government changes income taxes without changing government spending, calculate the minimum change and indicate the direction of change in income taxes required to shift the aggregate demand curve to close the output gap. Show your work. (c) Which fiscal policy action, changing government spending or changing income taxes, is more effective in closing the output gap? Explain. (d)…