Question 1There is a recession gap of $150 billion in the economy. The MPS is 20%.What is the MPC [Select]and the GovernmentSpending Multiplier [Select]Government need to [Select]much [Select]change taxes, would they [Select]the Tax multiplier [Select][Select]? Would thespending? By how? If the Government decided totaxes? What isand by how much

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] ? Would the spending? By how ? If the Government decided to

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] ? Would the spending? By how ? If the Government decided to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: The GDP must grow by at least $60 billion in order to achieve the target growth rate. The country is…

A: The gross domestic product(GDP) refers to the market value of all the final commodities(goods and…

Q: If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much…

A: The contractionary gap means real GDP is less than the potential GDP such that that the economy is…

Q: If the marginal propensity to consume equals 0.80, the tax rate equals 0.20, and the marginal…

A: Marginal propensity to consume is the proportion of change in income spent on consumption.Marginal…

Q: what will happen to the aggregate demand If government purchases increase by $100 billion, and the…

A: Aggregate demand (AD): - It is the total demand of goods and services in an economy at a particular…

Q: The tax cuts of 2017 increased the 2018 disposable income of households by roughly $200 billion. If…

A: The marginal propensity to save (MPS) is the percentage of additional income that is saved rather…

Q: I want to raise aggregate demand by $2 trillion and the marginal propensity to consume is 80%, then…

A: We are going to use Government expenditure multiplier to answer this question.

Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…

A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…

Q: real GDP = (Change in Taxes) X Change in equilibrium (Tax Multiplier) Change in equilibrium real GDP…

A: Initial change in the tax or investment causes multiple change in final income. The value of…

Q: Suppose that the economy is experiencing a recession with an estimated recessionary gap of $30…

A: Recessionary Gap or the contractionary gap is a situation in an economy or nation when the country’s…

Q: Explain how the conduct of fiscal policy affects consumption and investment in equilibrium.

A: Fiscal policy is a macroeconomic policy that is implemented by the government for monitoring and…

Q: Assume the MPC is 0.8. If government were to impose $20 billion of new taxes on household income,…

A: Given MPC = 0.8 New taxes imposed = $20 billion

Q: Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government aims to increase…

A: Gross domestic product (GDP) is the standard measure of the value added created through the…

Q: If the MPC is 0.9 what will happen to GDP if the government cut spending bt S2.

A: Given data: MPC, c=0.9Government spending, G=$2

Q: Consider a simple model where consumption is C = c(Y-T), Y-T is disposable income, c is the marginal…

A: Fiscal multiplier (FM): It is the ratio of change in total output to change in taxes FM=∂Y∂T This…

Q: An increase in spending of $25 billion increases real GDP from $600 billion to $ 700 billion. The…

A: MPC is the marginal propensity to consume. Marginal propensity to consume is calculated as the…

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.…

A: Recession is a period where real GDP is decreasing. This can be rectified by increasing aggregate…

Q: Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the…

Q: If the marginal propensity to save in an economy is 0.2, and the marginal propensity to import is…

A: The objective of the question is to calculate the multiplier in an economy given the marginal…

Q: If the propensity to consume decreases from 95% to 80%, then Fiscal stimulus multiplier does what?…

A: Fiscal stimulus Multiplier, is also known as the Government expenditure multiplier and is given by…

Q: The government estimates that the MPC is 0.80. How much should the government increase spending to…

A: The Marginal propensity to consume is given as 0.80. The anticipated shift in aggregate demand is…

Q: Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making…

A: If MPC=0.8 then MPS=1-MPC MPS=1-0.8 MPS=0.2

Q: If there is a recessionary gap of $200 Billion and the MPC is .9, how much would government spending…

A: Hi. Since there are two questions, we will solve only the first one. 9. Recessionary gap is given by…

Q: If the MPC is 0.4, the MPI is 0.2, and the government increases spending by $50 million, what will…

A: Marginal Propensity to Consume, is a measure in economics that indicates the proportion of an…

Q: Suppose actual real GDP is $7.91 trillion, potential real GDP is $13.33 trillion, the marginal…

A: Marginal Propensity to Consume(MPC): The marginal Propensity to Consume refers to the proportion of…

Q: Does MPC matter when using taxes to stimulate the economy in the short-run?

A: The stimulation of the economy using taxes involves fiscal policy. The expansionary/contractionary…

Q: What is the relationship between MPS and multiplie

A: In economics, savings refer to the amount that is kept aside by the people to use in an emergency or…

Q: Using the fiscal multiplier explain why, in Krugman’s opinion, fiscal austerity in France (and more…

A: Fiscal Austerity ; Under this government reduces the spending and increase taxation in order to…

Q: What can we predict about the effect on consumption of an increase in government spending? A)…

A: Consumption function is a sum of autonomous consumption and imputed consumption.

Q: If the MPC is .75, the government spending multiplier is

A: The government spending multiplier is the amount by which a change in government spending affects…

Q: How much government spending needs to be increased by to maintain full employment in the economy If…

A: *Answer:

Q: Suppose that C = 100+ 0.75(Y -100), I= 50, G = 30, and X- M = 100, all in billions of dollars. What…

A: Gross domestic product is the final combination of goods and services in a country. GDP is an…

Q: If the MPC is 0.9 what will happen to GDP if the government cut spending bt $2.

A: ∆Y = 11-c∆G where Y = GDP c = MPC G = government spending

Q: Use what you have learned about the fiscal multiplier to explain why, in Krugman’s opinion, fiscal…

A: Introduction Paul Krugman is an American economist and Nobel Prize laureate who works at the…

Q: Pretend you are a member of the Council of Economic Advisers and are trying to persuade the members…

A: The significance of economic advisors lies in their central role in influencing economic policies…

Q: The the expenditures multiplier effect, the spending to bring about a given amount of increase in…

A: Multiplier effect refers to the overall impact on economy of government investment consumption or…

Q: Given a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to…

A: MPC=0.75 Decrease in consumer spending=$300

Q: Suppose that the fiscal policy multiplier is 8.6. What is MPC? Use that MPC and assume that there is…

A: The value of MPC can be calculated as follows. The value of MPC is 0.883721.

Q: Let the marginal propensity to consume for an economy be 0.9 (MPC = 0.9). Policymakers in the…

A: Given MPC = 0.9 MPS = 1 – MPC = 0.1 Spending multiplier = 1/MPS = 10 Government reduced spending =…

Q: Suppose that the national economy is experiencing a recession with an estimated recessionary gap of…

A: A recessionary gap refers to the gap that arises when the actual real GDP is lesser than the…

Q: If the MPC = 3/5, then the government purchases multiplier is 5/3 5/2 5 1.5

A: Marginal propensity to consume is the proportion of the additional income used for the consumption…

Q: If the marginal propensity to consume (MPC) is 0.8, the government purchases multiplier will be that…

A: GDP is the sum of consumption, investment, government spending and net exports in an open economy.…

Q: Say the MPC is .6 and suppose taxes are cut by $300 billion and government spending is increased by…

A: we can calculate the change in government spending by using the multiplier formula as follow-

Q: Suppose that the economy is experiencing a recession with an estimated recessionary gap of $30…

A: The overall change in autonomous spending and its influence over total spending and aggregate demand…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: State the given information:

VIEW

Step 2: Calculate MPC, multiplier and change in government spending.

VIEW

Step 3: Calculation of change in tax required.

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Why might politicians prefer government spending increases instead of tax cuts to increase aggregate demand? tax multipliers are larger than government spending multipliers government spending multipliers are larger than tax multipliers politicians can direct government spending to their supporters politicians can direct tax cuts to their supporters government spending multipliers are larger than tax multipliers and politicians can direct government spending to their supporters
If the marginal propensity to save in an economy is 0.2, and the marginal propensity to import is 0.35, and the marginal tax rate is 0.25, what is the multiplier?
What will be the multiplier if MPS is 0.633 please response fast
What happens to the real GDP if the government increases spending by $50 million and the government multiplier is 1.5?
If the spending multiplier is 2.5 and the economy is in a $600 billion contractionary gap, how much should I increase government purchases to eliminate the gap?
i need the answer quickly
I need help on this question
The marginal propensity to expend is 0.5 and there is a recessionary gap of $200. What fiscal policy would you recommend? (Assume mpe = mpc) 0000 Expansionary fiscal policy; increase government expenditures by $100, or cut taxes by $200. Contractionary fiscal policy; decrease government expenditures by $200, or cut taxes by $100. Contractionary fiscal policy; decrease government expenditures by $100, or cut taxes by $200. Expansionary fiscal policy; increase government expenditures by $200, or cut taxes by $100.
If the multiplier in a closed economy with government is 2.5 and government spending increases by £350 million, by how much will income rise?
Using the AE model, show the economy in equilibrium. Then, show the impact of an increase in government spending to reduce the unemployment rate.Would the above be considered expansionary or contractionary fiscal policy?Assume the change in government spending in above is $25 billion dollars and MPC = .95. What will be the change in GDP?
Suppose that the economy is experiencing a recession with an estimated recessionary gap of $15 billion. Congress is considering the use of fiscal policy to ease the recession, but due to current political sentiments, it has determined that the maximum spending increase the government is willing to support is $2 billion. It wants to make up the remainder of the recessionary gap using tax cuts. If a spending increase of $2 billion is approved and the MPC is 0.8, by how much will taxes need to be reduced to close the remainder of the recessionary gap? Instructions: Round your answer to 2 decimal places. 5 billion
Answer fast