Suppose a country is in the midst of a recession with real GDP estimated to be $13.5 billion below potential GDP. The government's policy analysts beleve the current value of the marginal propensity to consume (MPC) is 0.90. Instructions: If needed, round answers to two decimal places. a. The government spending multiplier is The tax multipler is b. If the government wants to stimulate the economy so that real GDP is to equal potential GDP, It should increase government spending by $ billion. Alternatively, it could reduce taxes by $ billion. c. Suppose that during the recession, people are less confident and end up spending 50% of any additional income and saving the rest. The new value for the MPC is The actual government spending and tax multipliers will be [(Cick to select) the multipliers calculated in part a. If the government increases spending or cuts taxes by the amounts calculated in palt b, real GDP will be (Cick to select) potential GDP after the policy is implemented. annuar abouO uhu is the estimate of the MPC important when determining fiscal policy?

Suppose a country is in the midst of a recession with real GDP estimated to be $13.5 billion below potential GDP. The government's policy analysts beleve the current value of the marginal propensity to consume (MPC) is 0.90. Instructions: If needed, round answers to two decimal places. a. The government spending multiplier is The tax multipler is b. If the government wants to stimulate the economy so that real GDP is to equal potential GDP, It should increase government spending by $ billion. Alternatively, it could reduce taxes by $ billion. c. Suppose that during the recession, people are less confident and end up spending 50% of any additional income and saving the rest. The new value for the MPC is The actual government spending and tax multipliers will be [(Cick to select) the multipliers calculated in part a. If the government increases spending or cuts taxes by the amounts calculated in palt b, real GDP will be (Cick to select) potential GDP after the policy is implemented. annuar abouO uhu is the estimate of the MPC important when determining fiscal policy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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