Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion. Four economists agree that expansionaryfiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should beused.Economist A believes that the government spending multiplier is 8 and the tax multiplier is 4. Economist B believes that the government spendingmultiplier is 4 and the tax multiplier is 2.Compute the amount the government would have to increase spending to close the output gap according to each economist's belief. Then, for eachscenario, compute the size of the tax cut that would achieve this same effect.Policy Options for Closing Output GapIncrease in SpendingTax CutSpending Multiplier Tax Multiplier(Billions of dollars)(Billions of dollars)Economist A84Economist B42Economist C favors increases in government spending over tax cuts. This means that Economist C likely believes that:O Government purchases increase aggregate demand by stimulating investment.Show desk1:27 PM4/29/2022H Homework (Ch 23)Compute the amount the government would have to increase spending to close the output gap according to each economist's belief. Then, for eachscenario, compute the size of the tax cut that would achieve this same effect.Policy Options for Closing Output GapIncrease in SpendingTax CutSpending Multiplier Tax Multiplier(Billions of dollars)(Billions of dollars)Economist A84Economist B42Economist C favors increases in government spending over tax cuts. This means that Economist C likely believes that:O Government purchases increase aggregate demand by stimulating investment.O Part of a dollar in tax cuts may be saved rather than spent and thus does not fully contribute to aggregate demand.Economist D argues that it is not possible to move the economy out of recession by increasing government spending. Which of the followingstatements is consistent with Economist D's belief?O A rise in government spending does not crowd out private sector spending.O A rise in government spending completely crowds out private sector spending.HG18O62

Fiscal policy is the use of government spending and taxation to influence the economy.Fiscal policy…

Policy Options for Closing Output Gap Increase in Spending Tax Cut Spending Multiplier Tax Multiplier (Billions of dollars) (Billions of dollars) Economist A 8 4 Economist B 4 2 Economist C favors increases in government spending over tax cuts. This means that Economist C likely believes that: O Government purchases increase aggregate demand by stimulating investment. O Part of a dollar in tax cuts may be saved rather than spent and thus does not fully contribute to aggregate demand. Economist D argues that it is not possible to move the economy out of recession by increasing government spending. Which of the following statements is consistent with Economist D's belief? O A rise in government spending does not crowd out private sector spending. O A rise in government spending completely crowds out private sector spending.

Policy Options for Closing Output Gap Increase in Spending Tax Cut Spending Multiplier Tax Multiplier (Billions of dollars) (Billions of dollars) Economist A 8 4 Economist B 4 2 Economist C favors increases in government spending over tax cuts. This means that Economist C likely believes that: O Government purchases increase aggregate demand by stimulating investment. O Part of a dollar in tax cuts may be saved rather than spent and thus does not fully contribute to aggregate demand. Economist D argues that it is not possible to move the economy out of recession by increasing government spending. Which of the following statements is consistent with Economist D's belief? O A rise in government spending does not crowd out private sector spending. O A rise in government spending completely crowds out private sector spending.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10. Crowding out effect Suppose economists observe that an increase in government spending of $13 billion raises the total demand for goods and services by $65 billion. If these economists ignore the possibility of crowding out, they would estimate the marginal propensity to consume (MPC) to be Now suppose the economists allow for crowding out. Their new estimate of the MPC would be than their initial one.
QUESTION 10 The multiplier effect demonstrates that: O equal increases in government spending and taxes do not change the equilibrium GDP equal increases in government spending and taxes reduce the equilibrium GDP equal increases in government spending and taxes increase the equilibrium GDP. taxes have a stronger effect upon equilibrium GDP than do government purchases. government purchases have a stronger effect upon equilibrium GDP than do taxes. Click Save and Submit to save and submit. Click Save All Answers to save all answers. SA
pls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?
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4 HOMEY set of any of yes to $30 -0- -o- My ly Suppose that for every increase in the sterest rate ens peresage the end of westmant spending decies by 565 bon Based on the anes the level of investments to b Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to known as the by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (ADS) after accounting for the impact of the increase in government purchases on the interest rate and the level of…