Questions number 6 to 10 are based on having an MPC equal to 0.8 and potential output is P800 billion. Question #6. The government spending multiplier is: a. 0.8 b. 1.25 c. 5 d. 4 If the current real GDP is P700 billion: a. there is an inflationary gap b. there is a recessionary gap c. the economy is in long-run equilibrium d. government transfers should be decreased.

Questions number 6 to 10 are based on having an MPC equal to 0.8 and potential output is P800 billion. Question #6. The government spending multiplier is: a. 0.8 b. 1.25 c. 5 d. 4 If the current real GDP is P700 billion: a. there is an inflationary gap b. there is a recessionary gap c. the economy is in long-run equilibrium d. government transfers should be decreased.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 20SQ

See similar textbooks

Related questions

Q: An economy has the following consumption function: C=$200+0.8DI . The government budget is balanced,…

A: The equilibrium in a macroeconomic model emerges when the aggregate demand for final goods , which…

Q: An increase in spending of $25 billion increases real GDP from $600 billion to $ 700 billion. The…

A: MPC is the marginal propensity to consume. Marginal propensity to consume is calculated as the…

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.…

A: Recession is a period where real GDP is decreasing. This can be rectified by increasing aggregate…

Q: illion + 0.9 Y and the government wants to timulate the economy. By how much will ggregate demand at…

A: Aggregate demand is a measurement of the total amount of demand for all finished goods and services…

Q: Consider a closed economy with fixed prices and wages. Suppose consumption function takes the form C…

A: The new tax rate is 0.14 C=150+0.8Yd From here, we know initial MPC = 0.8 As MPC = Change in C/…

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: 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: Assume the economy is in a recession and real GDP is below its potential level of output. The MPC is…

A: This can be described as a concept that shows how much part or portion of an additional income…

Q: A simple closed economy, with an mpc equal to 0.75. The government has passed a balanced budget…

A: Given: MPC= 0.75 Economy goes into a recession, so government spending increases by 40 million

Q: Suppose a country is in the midst of a recession with real GDP estimated to be $13.5 billion below…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: 2. Suppose the consumption function of country A is C-1000+ 0.8Y, ( is the disposable income).…

A: Equilibrium condition: Y= C+I+G

Q: 5. Suppose Bard is its own marginal propensity to consume at Bard is 0.5. Autonomous consumption at…

A: Answer to the question is as follows:

Q: The Italian government decides to stimulate the economy by sending checks worth $70 billion to…

A: GDP: GDP or gross domestic product is the sum of the value of all end commodities produced within…

Q: If Multiplier is 1/1-MPC and MPS+MPC=1, MPC= Marginal propensity to consume and MPS= marginal…

A: The economics as a study is based upon the idea that the societies tend to have a limit to the…

Q: When the unemployment rate increases, the budget: a. is unaffected b. tends to move into deficit c.…

A: Unemployment adversely impacts the central government's capacity to create pay and furthermore will…

Q: 1. If an economy has an MPC of 0.9 what is the multiplier? 2. If an economy has an MPS of 0.2 what…

A: Multiplier Amount of new income that is generated from an addition of extra income. Marginal…

Q: A decrease in government purchases of $6 billion leads to an initial $4.5 billion decrease in…

A: The marginal propensity to withdraw refers to the portion of the additional income a consumer…

Q: Suppose the consumption function is $800 billion +0.8y and the government wants to stimulate the…

A: As there are multiple parts, only the first three would be solved, to get the answers of the rest of…

Q: Imagine the government wants to conduct an expansionary fiscal policy and needs an expert to answer…

A: Marginal propensity to consume shows how consumption changes as income changes. It is the ratio of…

Q: If the MPS were equal to 0.75, the expenditure multiplier would be * a. Less than zero b. zero c.…

A: Given: MPS=0.75 To find: Expenditure multiplier

Q: Principle 1. Explain what it means If The Marginal Propensity to Consume = 2/3 And draw a…

A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…

Q: Suppose the consumption function is C-$700 billion+0.8Y and the government wants to stimulate the…

A: Aggregate expenditure: aggregate expenditure is the sum of consumption expenditure, investment…

Q: Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral…

A: Under the neutral tax cut policy the taxes are cut in such a manner that the net revenue of the…

Q: Due to COVID-19 Pandemic, the economy of Finland is in a recession. The government is planning to…

Q: The federal government implements an expansionary fiscal policy of increased spending and decreased…

A: Fiscal policy delineates the efforts put by the federal government to control and regulate the…

Question

Questions number 6 to 10 are based on having an MPC equal to 0.8 and potential output is P800 billion. Question #6. The government spending multiplier is:

a. 0.8

b. 1.25

c. 5

d. 4

If the current real GDP is P700 billion:

a. there is an inflationary gap

b. there is a recessionary gap

c. the economy is in long-run equilibrium

d. government transfers should be decreased.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Questions 9 and 10?❤️❤️
If the MPS were equal to 0.75, the expenditure multiplier would be * a. Less than zero b. zero c. between zero and one d. one e. greater than one
An economy has the following consumption function: C=$200+0.8DI . The government budget is balanced, with government purchases and taxes both fixed at $1,000. Net exports are $100. Investment is $600. 1. The value of equilibrium in this model is . 2. If government spending increases by $150, the equilibrium value increases by , demonstrating a multiplier value of . 3. If both G and T rise by $150 at the same time, the equilibrium Y will increase by
Q1. Consumption is given by C-100+0.8YD and 1-50. The fiscal policy is summarized by G-200, TR 62.5 and t 0.25 a) what is the equilibrium level of income? what is the value of the new multiplier? Why is this less than the multiplier in the earlier problem? b) what is the value of the budget surplus(BS) when1=507? What is BS when investment increases to 1007? .C) Assuming that the full employment level of income Y-1200, what is the full employment BS* when I=50
Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession. Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers as a whole number. a. By how much would government spending have to rise to shift the aggregate expenditures schedule by $25 billion? | billion How large a tax cut would be needed to achieve the same increase in aggregate expenditures? Tax cut = $ billion
Question 4. Due to COVID-19 Pandemic, the economy of Finland is in a recession. The government is planning to increase government spending by 30 billion euros. Assume that marginal propensity to consume is 0.75 and there is no crowding-out effect. Define this policy measure and its consequences. Quantify the total effect of an increase in government spending on aggregate demand. Compare if the tax cut of 30 billion euros would lead to the same result. Discuss how can the crowding-out effect change the consequences of an increase in government spending.
An increase in spending of $25 billion increases real GDP from $600 billion to $ 700 billion. The Marginal Propensity to Consume must be____ and the mulitplier must be_____. MPC= 25/100 or .25 Multiplier= 1/1-.25 or 1.34 How is this Wrong?
Consider a closed economy with fixed prices and wages. Suppose consumption function takes the form C = 150+0,8Yd, Investments are I = 200, government purchases are G = 350, tax rate t= 0,1. There are no lump-sum taxes. (some calculations are added in the images) 1)Compute the government spending multiplier before and after changes in tax rate. Explain why multiplier is changed? 2) If the potential output is 3000 and economy is in initial equilibrium (a) what changes in government purchases the Government need to implement in order to achieve potential output? Show how changes in government purchases affect the planned aggregate spending line and new equilibrium output.
The government estimates that the MPC is 0.80. How much should the government increase spending to get an anticipated total shift in aggregate demand of $500 billion? (Hint: You will need to calculate the multiplier first.) $100 Billion $200 Billion $400 Billion $50 Billion
suppose the government wishes to illuminate recessionary GAP of 100 billion and the MPC is .75. How much must the government increase in spending instead of increasing government spending by the amount you calculated what would be the effect of the government decreasing taxes by this amount explain?
Questions A, B, and C are associated with each other. Please answer all three. Thank you!
Give me a correct response to this one