Answered: Suppose the government enacts a…

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 the government enacts a stimulus program composed of

$600 billion of new government spending and $200 billion of tax cuts for an economy currently producing a GDP of $14,000 billion.

If all of the new spending occurs in the current year and the government expenditure multiplier is 1.8, the expenditure portion of the stimulus package will add ....... percentage points of extra growth to the economy.

(Round your response to two decimal places.)

If the government taxation multiplier is 1.2, the tax cut portion of the stimulus package will add ........ percentage points of extra growth to the economy.

(Round your response to two decimal places.)

As a result of the stimulus program, the economy's GDP was increased by

....... percentage points over its value without the program.

(Round your response to two decimal places.)

If the economy's actual growth was −3 percent, then without the stimulus package, growth would have been ..... percentage points.

(Round your response to two decimal places and use a minus sign if

necessary.)

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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