1.)If the MPC is 0.8 and taxes increase by $100billion, what is the effect on equilibrium RGDP?equilibrium RGDP will fall by $80 billionequilibrium RGDP will fall by $125 billionequilibrium RGDP will fall by $400 billionequilibrium RGDP will fall by $500 billion2.)If equilibrium RGDP is $10000 billion and fullemployment GDP is $9000 billion, and the MPC =0.75, what is the appropriate fiscal policy to returnthe economy to full employment GDPreduce taxes by $250 billionreduce taxes by $333.33 billionraise taxes by $250 billionraise taxes by $333.33 billion

An economy is said to be at its equilibrium level of income when aggregate supply and aggregate…

Answered: mployment GDP is $9000 billion, and the…

mployment GDP is $9000 billion, and the MPC = 75, what is the appropriate fiscal policy to return ne economy to full employment GDP reduce taxes by $250 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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Question

1.)
If the MPC is 0.8 and taxes increase by $100
billion, what is the effect on equilibrium RGDP?
equilibrium RGDP will fall by $80 billion
equilibrium RGDP will fall by $125 billion
equilibrium RGDP will fall by $400 billion
equilibrium RGDP will fall by $500 billion
2.)
If equilibrium RGDP is $10000 billion and full
employment GDP is $9000 billion, and the MPC =
0.75, what is the appropriate fiscal policy to return
the economy to full employment GDP
reduce taxes by $250 billion
reduce taxes by $333.33 billion
raise taxes by $250 billion
raise taxes by $333.33 billion

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3