Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, the federal government would need to increase government purchases by more than $100 billion. O None of the above is correct. The federal government must decrease government purchases in this case. O $100 billion. O less than $100 billion.

Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, the federal government would need to increase government purchases by more than $100 billion. O None of the above is correct. The federal government must decrease government purchases in this case. O $100 billion. O less than $100 billion.

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

What would happen to output, employment, and the price level if the government increased spending on infrastructure, ceteris paribus? O Output would decrease, employment would decrease, and the price level would decrease O Output would decrease, employment would decrease, and the price level would increase O Output would decrease, employment would increase, and the price level would increase Output would increase, employment would increase, and the price level would decrease. O Output would increase, employment would increase, and the price level would increase Question 2(Multiple Choice Worth 5 points) (03.06 MC) Assume the price level is increasing, real GDP is decreasing, and the unemployment rate is increasing. Which event would explain this macroeconomic situation? OA positive supply shock OA negative supply shock A positive demand shock OA negative demand shock O insufficient data
D₂ Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit? O a movement from Point A to Point C a movement from Point B to Point A O a movement from Point B to Point F a movement from Point C to Point B
In the United States, from the most recent fiscal data we reviewed in class, total government spending is roughly 39% of GDP; yet, using the expenditure method for calculating GDP, government expenditures on goods and services were only 17% of GDP. Which of the following most likely explains the difference? Select one: O a. Transfer payments are included in the second figure, but not the first one. O b. Transfer payments are included in the first figure, but not the second one. O c. Military (i.e. defense) spending on goods and services is included in the second figure, but not the first one. O d. Military (i.e. defense) spending on goods and services is included in the first figure, but not the second one.
Don't answer by pen paper and don't use chatgpt otherwise we will give dounvote
QUESTION 14 Assuming that the "equilibrium income" is $4,000 and the "full-employment" income is $8,000, which means a recessionary gap of $4,000, how much tax cut is needed to fill the gap if MPC is 0.50? O $7,000 O $5,000 O $3,000 O $4,000
The graph to the right shows a situation in which the economy was in equilibrium at potential GDP (at point A) when the demand for housing sharply declined. What actions can the federal government take to move the economy back to potential GDP? OA. Increase the money supply. B. Increase government spending or decrease taxes. OC. Decrease government spending or increase taxes. OD. Both A and B. 1.) Use the line drawing tool to draw the results of these actions on your graph. Label your new line(s). 2.) Use the point drawing tool to locate the new equilibrium point. Label this point 'C'. Carefully follow the instructions above, and only draw the required objects. P₁ LRAS B Y₁ Yo AD₁ Real GDP (Y) SRAS AD
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
What could cause the following shift? O Increase in GDP. O Expansionary fiscal policy. O Decrease in future MPK. All of the above. FE IS LM
Today the federal government collects nearly O $1 billion a year in tax revenues. O $500 billion a year in tax revenues. O $1 trillion a year in tax revenues. O $4 trillion a year in tax revenues.
The crowding-out effect is the tendency for a government budget deficit to raise the and investment. O A. price level; increase O B. real interest rate; decrease O C. quantity of output; increase O D. real wage rate; decrease Click to select your answer. 888 :二。 F7 F6
TRUE - OR - FALSE A federal budget surplus occurs when government expenditures exceed tax revenues. O True O False
5. Show why a $10 billion reduction in government purchases of goods and services will have a larger effect on real GDP than a $10 billion reduction in government transfers by completing the accom- panying table for an economy with a marginal propensity to consume (MPC) of 0.6. The first and second rows of the table are filled in for you: on the left side of the table, in the first row, the $10 billion reduction in government purchases decreases real GDP and disposable income, YD, by $10 billion, lead- ing to a reduction in consumer spending of $6 billion Rounds 1 2 3 4 5 6 7 8 9 10 Decrease in G=-$10 billion (billions of dollars) Change in real GDP Change in G or C AG = -$10.00 AC = AC = AC = AC = AC = AC = AC = AC = AC = -6.00 ? ? ? ? ? ? ? ? -$10.00 -6.00 ? ? ? ? ? ? ? ? Change in YD -$10.00 -6.00 ? ? ? ? ? ? ? ? Change in TR or C ATR=-$10.00 AC = AC = AC = AC = AC = AC = AC = AC = AC = (MPC x change in disposable income) in row 2. How- ever, on the right side of the table, the $10…