Refer to the information provided in Figure 17.2 below to answer the questions that follow.Price levelRFigure 17.2Y₁OutputASADRefer to Figure 17.2. According to the new classical economists, under rational expectations an expected decreasein government spending wouldO shift AD, to the left.Oshift AD, to the right.O shift AS, to the right.O not change AD and AS.

According to new classical economics, under rational expectations, an expected decrease in…

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Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 2CQQ

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Suppose Congress decides to reduce the budget deficit by cutting government spending. a. Use the Keynesian-cross model to illustrate graphically the impact of a reduction ingovernment purchases on the equilibrium level of income. Be sure to label: i) the axes;ii) the curves; iii) the initial equilibrium values; iv) the direction the curve shifts; andv) the terminal equilibrium values. b. Explain what happens to equilibrium income as a result of the cut in governmentspending.
2. a. Suppose policymakers passes legislation that significantly reduces taxes. Use the Keynesian-cross model to illustrate graphically the impact of a reduction in taxes on the equilibrium level of income. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curve shifts; and v. the terminal equilibrium values. 'sl b. Explain in words what happens to equilibrium income as a res" of the tax cut and the time horizon appropriate for this analysis.
please state which one the answer is Many thanks - question is attached
Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. In this model, if lthere is an increse in both labor productivity and the marginal propensity to consume while autonomus expenditures remain unchanged, what will happen to the level of employment? a. can't say for sure b. decreses c. stays the same d. increases
If the marginal propensity to consume is 0.75, byhow much would government spending have to rise toincrease output by $1,000 billion? By how muchwould taxes need to decrease to increase output by$1,000 billion?
Suppose that in 2011, Quarterville’s government cuts taxes. Show how this event will change equilibrium output and price level by shifting either the SRAS or AD curve.
Help The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that Multiple Choice an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP a decrease in the price level shifts the aggregote expenditures schedule downward and decreases real GDP a decreose in the price level shifts the aggregate expenditures scheduie upiward and decreases real GDP an increase in the price level shifts the eggregate expenditures schedule downverd and decreases real GDP
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession Instructions: In part around your answers to 2 decimal places. Enter your answers as positive numbers in part enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightwerd by 50 S 10.00 bilion How large a tax cut would be needed to achieve the same increase in aggregate demand? $ 13 billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt e, maintaining the budget balance at its current value) billion Increase spending by Increase taxes by bilion Save & Ext
Do neoclassical economists believe in Keynes law or Says law?
Attempts Average / 2 5. The aggregate supply curve in the simple Keynesian model Complete the following statement to make it true. "In the AD-AS framework, the simple Keynesian model includes an aggregate supply curve that Natural Real GDP." until the economy reaches its slopes upward Under what condition will an increase in total spending lead to an equivalent increase in Real GD O When the economy is producing more than Natural Real GDP. O When the economy is producing at Natural Real GDP. O When the economy is producing less than Natural Real GDP. O When the aggregate supply curve is vertical. is horizontal is vertical
Suppose that due ot a fiscal stimulus, there is an increase in disposable incomes of $100 billion in the first round. Then, $33 billion was spent in consumption from this initial change of the disposable incomes. Following the same marginal propensity to consume, how much is the change in consumption spending in the next round from the $33 billion?
What would a Keynesian likely recommend in response to a recession?

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