Imagine the government wants to conduct an expansionary fiscal policy and needs an expert to answer the following questions before making a decision. a) Calculate the value of the multiplier effect if the marginal propensity to consume is 0.8. b) Calculate the increase in GDP which will occur, if the government increases its government spending by $600 million and the marginal propensity to consume is 0.8.

Q: n a hypothetical economy, the marginal propensity to consume out of disposable income is 0.90, the…

A: MPC stands for the marginal propensity to consume. An idea depicts the connection between changes in…

Q: If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much…

A: The contractionary gap means real GDP is less than the potential GDP such that that the economy is…

Q: Explain what the spending multiplier is. Describe the actions the government could take, using…

A: Spending measures the change in equilibrium GDP due to change in government spending.  Spending…

Q: Suppose actual real GDP is $13.19 trillion, potential real GDP is $12.96 trillion, the marginal…

A: Marginal Propensity to Consume(MPC): The marginal Propensity to Consume refers to the proportion of…

Q: a.) What is the level of the equilibrium income? b.) What is the value of the investment multiplier?…

A:

Q: Assume the Ghanaian economy is closed (thus where there is no export and imports) with the…

A: Disclaimer: “Since you have asked multiple questions, we will solve the first three subparts of the…

Q: Suppose economists observe that an increase in government spending of $11 billion raises the total…

A: Crowding Out Effect:In economics, the Crowding Out Effect means the situationwhere increased…

Q: Assume there is a recessionary gap of $200 billion, and that the government has decided to engage in…

A: Answer; Multiplier = 1/(1 - MPC) = 1/(1-0.5) = 2

Q: The average propensity to consume of a person is 0.6 and the marginal tax to consume is also 0.6.…

A: Average propensity to consume (APC) = 0.6 Average propensity to save (APS) = ?

Q: 1) Define MPC(marginal propensity to consume) and MPS(marginal propensity to save) 2) Define…

A: Since you have posted multiple independent questions in the same request, we will solve the first…

Q: The economy is described by the following functions: Shown in Picture where ?t is the tax rate.…

A: Multiplier associated with government purchases is the total change in income with change in…

Q: Suppose that real GDP for an economy is currently 16,000 billion, the government purchases…

A: Fiscal policy refers to the actions taken by the government to intefere in the economic activity and…

Q: Consider a simple model where consumption is C = c(Y-T), Y-T is disposable income, c is the marginal…

A: Fiscal multiplier (FM): It is the ratio of change in total output to change in taxes  FM=∂Y∂T This…

Q: Which of the following statements is true?

A: Government spending refers to the amount of expenditure carried out by the government on the…

Q: part 1. A government runs the budget at government spending G=8 and income tax T=7. The NX=0. The…

A: Given information G=8 T=7 NX=0 I=5 Autonomous consumption=3 MPC=0.6 AD=C+I+G+X-M

Q: The spending multiplier, m, is 1/(1-MPC). a) If the MPC is 0.9, what is the spending multiplier? b)…

A: Marginal Propensity to Consume is the proportion of an increase in income that gets spent on…

Q: Suppose that economists observe than an increase in government spending of $6 billion raises total…

A: Crowding out is a situation when there is a reduction in private investment spending due to an…

Q: If the marginal propensity to save in an economy is 0.2, and the marginal propensity to import is…

A: The objective of the question is to calculate the multiplier in an economy given the marginal…

Q: suppose the government wishes to illuminate recessionary GAP of 100 billion and the  MPC is .75. How…

A: The multiplier shows the change in real GDP as a result of a change in the autonomous expenditure.…

Q: Help with the following exercises please show formula and step by step 1)  Assume the MPC is 0.70…

A: 1. (a) To calculate the initial impact on real GDP, we can use the expenditure multiplier, which is…

Q: The government estimates that the MPC is 0.80. How much should the government increase spending to…

A: The Marginal propensity to consume is given as 0.80. The anticipated shift in aggregate demand is…

Q: You are given the following information about the Canadian economy. With every increase of one…

A: 1. Here given information is: Marginal tax rate: 12% Marginal propensity to import (MPI): 3%~0.03…

Q: Suppose that autonomous consumption (a) is 300, private investment spending (I) is 420, government…

A: ‘Real GDP’ is a macroeconomic metric that measures the value of an economy's goods and services over…

Q: c. If the government spending multiplier is 5, what is the tax multiplier? d. If the tax multiplier…

A: Government Spending Multiplier is 5 Government Spending multiplier =1 (1-MPC)=5 Therefore, MPC = 45…

Q: Suppose actual real GDP is $13.56 trillion, potential real GDP is $12.34 trillion, and the marginal…

A: Given Actual real GDP =$13.56 trillion Potential GDP =$12.34 trillion.Marginal propensity to consume…

Q: You are given the data concerning Freedonia, a legendary country i. C = 200 + 0.8Y ii. I =…

A: Investment: In a two-area economy, one piece of the aggregate expenditure is utilizing and the…

Q: Consider a hypothetical economy. Households spend $0.90 of each additional dollar they earn and save…

A: The total of net exports, government spending, investment spending, and consumption spending is…

Q: Explain the difference between the government purchases multiplier and the net tax multiplier. If…

A: Investment multiplier refers to the number of time income increases due to increase in the…

Q: If the MPC is​ .75, the government spending multiplier is

A: The government spending multiplier is the amount by which a change in government spending affects…

Q: Fill in the missing blanks in the following table. Assume for simplicity that taxes are zero. Also…

A: Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS):MPC refers to a fraction…

Q: Suppose the marginal propensity to consume is 0.81. What is the tax multiplier?   Multiple Choice…

A: The tax multiplier is a measure of the change in aggregate production caused by changes in…

Q: If the multiplier is 4 and a change in government spending leads to a cumulative $500 million…

A: The multiplier can be defined as the number which denotes the proportionate increase in income due…

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75  Tax multiplier = (-MPC/1-MPC) Tax multiplier= (-0.75/1-0.75)Tax multiplier=…

Q: An economy is operating with an output that is $400 billion dollars below its natural rate of $2000…

A: The economy’s current level of output is $1,600 billion (2,000 - $400) and the economy’s potential…

Q: PRICE LEVEL (CPI) The marginal propensity to consume (MPC) for this economy is_ ,, and the spending…

A: Marginal propensity to consume measures the spending level for a given raise in the payment level.…

Q: Suppose the aggregate expenditure (AE) schedule in an economy is given by the equation AE = 1,000 +…

A: Aggregate expenditure (AE) is a measure of national income. It is the total amount of spending in…

Q: If the marginal propensity to consume (MPC) is 0.8, the government purchases multiplier will be that…

A: GDP is the sum of consumption, investment, government spending and net exports in an open economy.…

Q: Assuming T = 0, for the following three consumption functions, i) identify the mpc and mps, iii) tax…

A: Marginal propensity to consume (MPC): - it is a fraction of the change in disposable income that is…

Q: Suppose that autonomous consumption (a) is 300, private investment spending(I) is 420, government…

A: We know, from the basic macroeconomic identity, that  Y = C(Y - T) + I + G Here, we have I = 420, T…

Q: government spending multipliers are larger than tax multipliers and politicians can direct…

A: First we have to look at the equation for the Simple-Keynesian-Model. Y=C(Y-T)+I+G Where-Y is the…