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: а. О.8 b. 1.25 С. 5 d. 4 7. 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.

Q: 6. Explain how built-in (or automatic) stabilizers work. What are the differences between…

A: GDP is the sum of consumption, investment, government spending and net exports.  GDP = C+I+G+NX

Q: What is the effect of a rise in the income tax on interest income? A rise in the income tax on…

A: Income tax is a sort of tax levied by governments on the earnings of enterprises and persons within…

Q: PRICE LEVEL 170 350 100 8 90 B 30 20 OUTPUT Aggregate Demand 40 50 Aggregate Demand Suppose the…

A: Tax cut affect aggregate demand in two different ways;First; Tax cut increases Disposable income and…

Q: Assume an economy where the government embarks on an expansionary fiscal policy, explain the effect…

A: An expansionary fiscal policy is undertaken by the government during recession when the actual GDP…

Q: Suppose that the investment demand curve in a certain economy is such that investment declines by…

A: The government has various policies to balance the economic activities. Imbalances in these economic…

Q: The tax cuts of 2017 increased the 2018 disposable income of households by roughly $200 billion. If…

A: The marginal propensity to save (MPS) is the percentage of a household's additional income that is…

Q: An increase in the income tax rate in an attempt to decrease a country's debt-to-GDP ratio may not…

A: The debt-to-GDP ratio measures the proportion of a country's national debt to its gross domestic…

Q: (2./The accompanying diagram shows the current mac- roeconomic situation for the economy of…

A: The central bank conducts the monetary policy by adjusting the money supply by conducting open…

Q: 3. In the figure below: 45 °(E-(Y-T )} Ep C+1 G menyale S+T S+T= LEAKAGES 'p+G= INJECTIONS oigmant y…

A: Note:  We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Answer True or False: 1. To reduce the fiscal deficit, the government has to raise taxes or cut…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: 3. The Keynesian view of fiscal policy Which of the following could cause a decrease in the budget…

A: Restrictive fiscal policy is a tool of government, where it will try to cut its spending. Generally,…

Q: be umbria, one witH high tax rate and one with a low tax rate. No suppose that government spending…

A: High marginal tax rates can deter work, saving, investment, and development, while explicit duty…

Q: 4. In the New-Keynesian model where government expenditure is financed through taxation only, if…

A: When government raises its expenditure by 100 in order to increase output, it leads to a rise in the…

Q: . At which time period is an economic expansion occurring? O Year 3 O Year 9 Year 1 b. What is the…

A: Business cycle: A business cycle, additionally referred to as an economic cycle or change cycle,…

Q: Which one of the Macroeconomic policy relating to government spending and borrowing? O a. a. Fiscal…

A: The economies around the world tend to focus on their growth, and development, where the policy…

Q: A decrease in Federal government taxes would: O. decrease in consumption and savings O. decrease…

A: Disposal Income refers to the amount of income an individual or household has available after taxes…

Q: Suppose the consumption function is C-$700 billion+08Y and the government wants to stimulate the…

A: Aggregate demand refers to the total demand for commodities and services made by all the economic…

Q: 1) Suppose that the government spending multiplier is 1.7, and that the tax multiplier is -1.2. An…

A: Total change multiplier =sum of the multiplier of spending and taxes =1.7+(-1.2)=0.5 There is an…

Q: Answer the questions below for the economy of Motak using the graph below. Government spending / net…

A: Government spending implies money spent by the public sector on the purchase of products and…

Q: The advantage of using contractionary fiscal policy to address a short-run inflationary gap, rather…

A: When the economy is in an inflationary gap, real GDP is larger than potential GDP and the price…

Q: 9. Focusing on the tax cut of 1982, the personal current tax receipts for 1981, the year before the…

A: Tax incidence:It is a necessary payment that is made to the government for the consumption of goods…

Q: Crowding out occurs when expansionary fiscal policy leads to O a higher money supply and a reduction…

A: Fiscal policy refers to the set of tools that the government uses in the situation of inflation or…

Q: Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion G = $2 trillion…

A: A closed economy is an economic model that addresses a system where no external trade or capital…

Q: Explain why the multiplier falls when taxes depend on income.   .1 Assume the following for the…

A: Equilibrium income means that the flow and the demand for goods and services are equal. AD=AS or…

Q: 3. You are given the following data concerning Mexico. - Consumption function: C = 1000+ 0.8Yd - Ya…

A: The consumption function describes the relationship between consumer spending (consumption) and the…

Q: When is the effect of fiscal policy on real GDP the highest? O a. Steep SRAS curve, Small multiplier…

A: Fiscal policy conducts by the government of a country. The fiscal policy implies changes in…

Q: 5. Fiscal policy cannot affect investment in the medium run because output always returns to its…

A: Natural level refers to the level at which the economy adjusts and settles in the long run, even if…

Q: 3. That is the difference between Govemment Expenditures (G) and Government Transfers (tr, part of…

A: As economies and societies developed, the study of economics got more complicated. Hence, as a…

Q: . How much more output does the $20 trillion U.S. economy produce when GDP increases by 1.0 percent?

A: GDP of the US economy = $20 trillion

Q: reduction in government expenditure or an increase in taxes is defined as:

A: Expansionary policy is employed with the aim of boosting aggregate demand when private demand is…

Q: a. In which instance would "crowding out" likely become a concern? A balanced budget law prevents…

A: Introduction: Crowding out refers to a situation where increased government borrowing to finance…

Q: E,Q 48 44 40 AE2 AE1 36 32 28 24 20 16 12 8. 4 0 8 16 24 32 40

A: In an economy, aggregate expenditure refers to the total amount of money spend on the purchase of…

Q: Consider the ɔl owing information for a closed economy Consumption 400 +0.6(Y-T) Taxes 500…

A: Here we calculate the tax multiplier by using the given information and choose the correct option ,…

Q: Suppose that real GDP is currently $1.24 trillion, potential GDP is $1.33 trillion, the government…

A: Aggregate demand is a sum of consumption spending, investment, government spending and net exports.…

Q: 5. Demand side fiscal policy is also known as Keynesian Economic Theory * True O False

A: In simple words we can say that the demand side policies are merely known to be as the economic…

Q: Suppose that two countries differ on in the size of their MPC, where the MPC is high in country A…

A: IS-LM model is widely used to denote the simultaneous equilibrium in product and money markets.…

Q: Which of the following statements are correct (assuming a closed economy)? 1. The higher the…

A: Fiscal policies are the actions taken by the government to interfere in the economy and help the…

Q: 6. Does government borrowing crowd out private spending? Suppose a hypothetical economy is operating…

A: Full employment is what is going on in which all suitable work assets are being utilized in the most…

Q: Refer to the diagram. Discretionary fiscal policy designed to expand GDP is illustrated by O A. the…

A: Answer: Option:B is correct A movement from a to c along curve T2.

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

A: In economics, the marginal propensity to consume is a metric that quantifies induced consumption,…

Q: Choose all the options below that demonstrate a contractionary fiscal policy. Select all that apply:…

A: Contractionary fiscal policy is a sort of fiscal policy wherein the public authority gathers more…

Q: Algonquin's equilibrium price level and real output? The initial equilibrium price level and real…

A: MPC = 0.33 Natural Unemployment rate = 4.5% Price level  (2010=100) Real GDP AD0 Real GDP AD1…

Q: Assuming a constant money supply, government expenditures can be financed by which of the following?…

A: The money supply helps the economy to grow by increasing the purchasing power on one hand while it…

Q: Which of the following policies is an example of an automatic stabilir? OA President Reagan who had…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…