The graph shows the income-expenditure model for the country of Mireland, where AE represents aggregate expenditure. The graph illustrates a downward-sloping green line labeled "Planned AE" and an upward-sloping red line labeled "45 degree line." The x-axis represents Real GDP (in billions of dollars), ranging from 0 to 70. The y-axis represents Planned spending (also in billions of dollars), also ranging from 0 to 70.A new government is elected in Mireland and decides to make even deeper cuts in direct spending, totaling $14 billion. The task is to determine the total change in real GDP, with the answer provided to the nearest whole billion.In the given example, the Mirsh government wants to cut spending by $6.25 billion as part of efforts to reduce a huge budget deficit. This analysis considers a marginal propensity to consume (MPC) of 0.5 and a total tax take of one-quarter in any changes in GDP. It's assumed that there is no international trade or inflation, and the interest rates are fixed.The field for the response is labeled "total change in real GDP: $ ___ billion," with an input value of "10" filled in.

The marginal propensity to consume (MPC) is 0.5The government decided to reduce total spending by…

The graph shows the income-expenditure model for the country of Mireland, where AE represents aggregate expenditure. The Mirsh government wants to cut spending owing to a huge budget deficit and, as such, decides to reduce infrastructure spending by $6.25 billion. Show the impact of this spending cut given a marginal propensity to consume (MPC) of 0.5 and a total tax take of one-quarter in any changes in GDP. In this example, assume that there is no international trade or inflation, and that interest rates are fixed. ggregate spending (in billions of dollars) 88888888888 70 S 45 40 30 25 20 45 degree line Planned AB A new government is elected in Mireland and decides to make even deeper cuts in direct spending, totaling $14 billion. What will be the total change in real GDP? Please provide the answer to the nearest whole billion. total change in real GDP: $ 10 0 billion Enter numeric value

The graph shows the income-expenditure model for the country of Mireland, where AE represents aggregate expenditure. The Mirsh government wants to cut spending owing to a huge budget deficit and, as such, decides to reduce infrastructure spending by $6.25 billion. Show the impact of this spending cut given a marginal propensity to consume (MPC) of 0.5 and a total tax take of one-quarter in any changes in GDP. In this example, assume that there is no international trade or inflation, and that interest rates are fixed. ggregate spending (in billions of dollars) 88888888888 70 S 45 40 30 25 20 45 degree line Planned AB A new government is elected in Mireland and decides to make even deeper cuts in direct spending, totaling $14 billion. What will be the total change in real GDP? Please provide the answer to the nearest whole billion. total change in real GDP: $ 10 0 billion Enter numeric value

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concerning the government budget constraint and the impact of cutting taxes on investment - if the government cuts taxes and funds this tax cut by cutting government spending in the same period is it right to say that government saving doesn't change but private saving will as consumers will receive this permanent tax cut - thereby increasing the income flow increasing consumption.
The marginal propensity to consume out of permanent income equals 0.9 and the marginal propensity to consume out of transitory income equals 0.1. Suppose that there is an emergency increase in government spending of $200 billion to repair infrastructure. The spending takes place within a year. The spending increase is financed by a one-time increase in taxes. Prior to the increase in government spending, permanent income equals $9,600 billion and transitory income equals zero. (a) Compute the amounts of consumption expenditures and private saving prior to the tax increase. (b) Compute the amount of changes in consumption expenditures and private saving, given that the tax increase lasts for only one year. (c) Compute the initial change in aggregate demand that results from this combination of increases in government spending and taxes.
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100). The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100). Now, suppose there is an increase of $30 billion in investment in each economy.
Assuming the MPC = 0.75, determine the size of the simple spending multiplier, the size and direction of the shift in the aggregate expenditure line, the size and direction of the total change in real GDP demanded, and the size and direction of the shift in aggregate demand following a $20 billion decrease in autonomous investment. Illustrate your answer with graphs of the aggregate expenditure line and the aggregate demand curve (showing how the curves shift) . Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal propensity to consume is 0.9. What is the total amount of additional economic activity that results from this tax cut?
Consider a hypothetical economy where there are no taxes and no foreign trade, and households spend $0.90 of each additional dollar they earn and ; the marginal propensity to save (MPS) for this save the remaining $0.10. The marginal propensity to consume (MPC) for this economy is economy is ; and the multiplier for this economy is Suppose investment spending in this economy decreases by $150 billion. The decrease in investment will lead to a decrease in income, generating a decrease in consumption that decreases income yet again, and so on. Fill in the following table to show the impact of the change in investment spending on the first two rounds of consumption spending and, eventually, on total output and income. Hint: Be sure to enter a negative sign in front of the number if there is a decrease in consumption. Change in Investment Spending = -$150 billion First Change in Consumption = $ Second Change in Consumption $ Total Change in Output = $ billion billion billion In reality,…
The Image attached titled Table 1 is data for a hypothetical private-closed economy. Use the information in the Table 1 to analyze aggregate expenditures (AE) model attached (Figure 1. Equilibrium in a Private Closed Economy). Question 1 Identify the mistake and explain why the graph of the aggregate expenditures line does not correctly illustrate the economy's equilibrium. Question 2 Chart the aggregate expenditures (AE) model in Excel using the data from Table 1: A Private Closed Economy. Remember, the 45degree line (also known as the Keynesian Cross) is a tool that shows how differences in aggregate expenditures and real GDP can affect business inventories which will affect future levels of real GDP. Aggregate expenditure and GDP are both function of consumption, investment, government spending, and net exports. So, the equations for the two are identical: Y = C + I + G + NX, and AE (aggregate expenditure) = C + I + G + NX For private closed economy the equation…
The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100. If the MPC = 0.75 and income increases in increments of 200, find the equilibrium level of income. If full employment requires an income level of 2,000, what (if anything) should the government do? Indicate both the direction of the spending change and the size of the spending change.
The levels of real disposable income and aggregate expenditures for an economy are given in the following table. -- Use the blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments will automatically connect the points. The black line represents the 45-degree line, where aggregate expenditures equal real GDP. Use the black point (plus symbol) to indicate equilibrium real GDP. - - In the previous graph, if the economy produces at an output level that is higher than equilibrium GDP, then the economy is in because aggregate expenditures are real GDP, and unplanned inventory investment is Read GDP (Y) Aggregate Expenditures (AE) (Trillions of dollars per year) (Trillions of dollars per year) 0 1 1 1.75 2 2.5 3 3.25 4 4 5 4.75 6 5.5 7 6.25 8 7 Use the blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments will automatically connect the points. The black line represents the…
Hand written solutions are strictly prohibited
Assume a model where marginal propensity to save is 0.2, the marginal propensity to import is 0.1 and the marginal income tax rate is 0.2. What is the size of the expenditure multiplier?
Instructions: Round your responses to two decimal places. If taxes were cut by $1 trillion and the MPC was 0.88, by how much would total spending trillion a. increase in the first year with two spending cycles per year?