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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Suppose economists observe that an increase in government spending of $14 billion raises the total demand for goods and services by $42 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.
Suppose the marginal propensity to save (MPS) is 0.25. If government expenditure goes up by $50 billion, then you can reasonably expect that, ceteris paribus: Real GDP (Y) in the economy will stay unchanged since this is only affected by consumer spending and not government expenditure. Real GDP (Y) in the economy will increase by $12.5 billion. Real GDP (Y) in the economy will increase by $200 billion. Taxes will go up by $50 billion to balance the budget.
Identify one fiscal policy action that could counter the increase in investments. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates
When the Federal government takes action to change taxes and spending to stimulate the economy such policy is: A) Discretionary B) Passive C) Automatic D) Nondiscretionary
If the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP $200 million, then by how much would they have to change taxes? A.decrease by $240 million. B.decrease by $160 million. C.decrease by $180 million. D.decrease by $50 million.
Solve all questions compulsory......
I could use some help finding the government's budget balance. Questions 4-7.
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. Fiscal Policy Instructions: Enter your answer as a whole number. If you are entering a negatlve number Include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrilum? $, billion b. If the MPC is 0.6 , how much do taxes need to change to shift aggregate demand by the amount you found in part a? $, billion Suppose Instead that the MPC is 0.8 . c. How much does aggregate demand and taxes need to change to restore the economy to Its long-run equilibrlum? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.
In which of the following circumstances is expansionary fiscal p In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Explain.a. When the investment accelerator is large or when it is small?b. When the interest sensitivity of investment is large or when it is small?
Suppose a government has a tax revenue shortfall. Will hyperinflation inevitably follow unless the government cuts its fiscal expenditures?
Macroeconomic** In the Keynesian model, when government decreases its spending by $20 billion, and it decreases taxes by $30 billion, and the MPC is .75, by how much will total spending in the economy change? Reg. multiplier = 4, tax multiplier = -3 Would this be 4 * 20 = 80 billion? The actual answer is 10 billion which I don't get it at all. Thanks.
There is an inflationary gap of $200 billion in the economy. The MPC is 90%. What is the MPS [Select] and the Government Spending Multiplier [Select] the Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would spending? By how ? If the Government decided to taxes? What is and by how much