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

See similar textbooks

Similar questions

Please answer the question below: If the current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. increase government spending by P25 billion b. increase government spending by P100 billion c. increase government spending by P20 billion d. decrease government spending by P100 billion If current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. decrease taxes by P100 billion b. increase taxes by P100 billion c. decrease taxes by P25 billion d. increase taxes by P25 billion * the attached photo is just connected to the question *
Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150 a. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. b. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?
If the marginal propensity to consume is then the government spending multiplier is 3. True O False
Please solve step by step and quick
Suppose the government implements contractionary fiscal policy. As a result, the inflation rate will likely _____ and the real growth rate will likely _____ in the short run. Rise or fall?
Suppose the marginal propensity to consume is equal to 0.4. If the government lowers tax rates and tax revenue falls by $50 billion, then disposable income will increase by________ billion and consumption spending will initially increase by ________ billion (before the multiplier effect kicks in).
An economy is operating with output that is $40 billion below its natural level. And fiscal policy makers want to close this recessionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant so there is no crowding out. the marginal propensity to consume 4/5 and the price level is completely fixed in the short run. In what direction and by how much would government spending need to change to close the recessionary gap? Explain.
Question 1 There is a recession gap of $150 billion in the economy. The MPS is 20%. What is the MPC [Select] and the Government Spending Multiplier [Select] Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would the spending? By how ? If the Government decided to taxes? What is and by how much
Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion, and specify decreases as a negative number. By how much will government spending change? change in government spending: $ What is the resulting change in the equilibrium level of real GDP? change in equilibrium level of real GDP: $ billion billion
Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. If the current actual Real GDP is at $300 million,. government spending by would bring the economy to full employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $ 54,054,054.05 d) increasing: $54,054,054.05
The tax cuts of 2017 increased the 2018 disposable income of households by roughly $200 billion. If the MPC were 0.65, Instructions: Enter your responses as a whole number. a. how much of this windfall was initially saved? $ billion b. how much AD stimulus resulted over time after all multiplier effects? $ billion When I work through (b), I get the answer of 1300 billion, but it state it is incorrect.
Please answer fast