There is an inflationary gap of $200 billion in the economy. The MPC is 90%. What is the MPS [Select] and the Government Spending Multiplier [Select] the Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would spending? By how ? If the Government decided to taxes? What is and by how much

There is an inflationary gap of $200 billion in the economy. The MPC is 90%. What is the MPS [Select] and the Government Spending Multiplier [Select] the Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would spending? By how ? If the Government decided to taxes? What is and by how much

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which is considered expansionary fiscal policy? a)a tax increase for wealthy individuals b)an increase in national defense spending c)regulations raising emission standards on trucks d)an increase in the money supply
Suppose that real GDP is currently $19.3 trillion, potential GDP is $23.0 trillion, the government purchases multiplier is 1.6, and the tax multiplier is -1.6. Holding other factors (such as prices and interest rates) constant, how will taxes (T) need to change to bring the economy to equilibrium at potential GDP? Provide your answer in dollars measured in trillions rounded to two decimal places. Use a negative sign for negative changes. Do not include any symbols, such as "S," "," "%," or "," in your answer. Your Answer: Answer
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?
To enact Contractionary Fiscal Policy, the federal government must be running a budget ___________.
Suppose that real GDP is currently $1.45 trillion, potential GDP is $1.51 trillion, the government purchases multiplier is 2.4, and the tax multiplier is 2. a. Holding other factors constant, government purchases will need to be increased by $ 0.0250 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) b. Holding other factors constant, taxes have to be cut by $ 0.0300 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) c. Construct an example of a combination of increased government spending and tax cuts that will bring the economy to equilibrium at potential GDP. The combination of increasing government spending by $0.0600 trillion and cutting taxes by $ trillion will bring the economy to equilibrium at potential GDP (Round to four decimal places as needed.) $0.0600 trillion $0.1440 trillion $0.1200 trillion $0.0100 trillion
Why do Republicans like tax cuts? Why are tax cuts a good thing? How does it affect the aggregate supply and demand graph?
3.5
50. Which of the following is an appropriate discretionary (active) fiscal policy if there is a recessionary gap? Group of answer choices an increase in the supply of money an increase in government purchases approved by the US Congress a decrease in transfer payments an increase in individual income taxes
The government lowers $0.9 trillion in taxes, restoring GDP from $10 trillion to its potential level of $11.2 trillion. What is the value of the tax multiplier? A -1.33 B -0.9 C -0.75 D -1 E -1.2
3.6
Describe the supply-side effects of a fiscal stimulus and explain how a tax cut will influence potential GDP.