What is the eventual effect on real GDP if the government increases its purchases of goods and services by $75,000? Assume the marginal propensity to consume (MPC) is 0.75. $     What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $75,000? Assume the MPC has not changed. $     An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in an identical eventual effect on real GDP. no change to real GDP. a larger eventual effect on real GDP. a smaller eventual effect on real GDP.

Q: Consider a hypothetical closed economy in which households spend $0.60 of each additional dollar…

A: Marginal Propensity to Consume (MPC) is the proportion of an increase in income that gets spent on…

Q: nultiplier the multiplier emains the same. remains the same. lecreases. decreases. ncreases.…

A: A) OPTION C IS CORRECT

Q: In the table below, there are no taxes (so that that real GDP equals disposable income) and no…

A: Marginal propensity to consume(MPC) can be understood as the change in consumption expenditure with…

Q: The Japanese government decides to stimulate the economy by increasing direct spending by $70…

A: Given,Increase in government spending: △G=$70 billionFinal change in real GDP: △Y=$280 billion The…

Q: Assume taxes are zero and an economy has a consumption function of C = 0.68 (Yd) + $237.99.  What is…

A: The marginal propensity to consume (MPC) index measures the proportion of income that is spent on…

Q: Help with the following exercises please show formula and step by step 1)  Assume the MPC is 0.70…

A: 1. (a) To calculate the initial impact on real GDP, we can use the expenditure multiplier, which 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: Suppose actual real GDP is $13.56 trillion, potential real GDP is $12.34 trillion, and the marginal…

A: Given Actual real GDP =$13.56 trillion Potential GDP =$12.34 trillion.Marginal propensity to consume…

Q: Explain the difference between the government purchases multiplier and the net tax multiplier. If…

A: Investment multiplier refers to the number of time income increases due to increase in the…

Q: Consider an economy in which autonomous consumption, planned autonomous investment, autonomous…

A: Given, Autonomous consumer spending =$3,000  Investment = Ip = $5,000 Government spending = G =…

Q: Fill in the missing blanks in the following table. Assume for simplicity that taxes are zero. Also…

A: Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS):MPC refers to a fraction…

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: PRICE LEVEL (CPI) The marginal propensity to consume (MPC) for this economy is_ ,, and the spending…

A: Marginal propensity to consume measures the spending level for a given raise in the payment level.…

Q: Expenditures that would exist at a zero level of income are called induced expenditures:  True or…

A: There are two types of expenditure : Induced expenditure and Autonomous expenditure  Induced…

Q: pose actual real GDP is $7.54 trillion, potential real GDP is $12.32 trillion, and the marginal…

A: The output gap is the difference between Actual output and potential output. If economy is below its…

Q: For the last time, consider the economy described above. You won't work directly with its numbers in…

A: Given;  Government spending= $1000 Net taxes= $1500 Output=$8000 Consumption=$3500 MPC=0.8 And…

Q: Which type of discretionary fiscal policy is likely to have the smallest overall effect on GDP…

A: Discretionary fiscal policy is the government policy to control economic growth and aggregate…

Q: Suppose actual real GDP is $13.74 trillion, potential real GDP is $12.69 trillion, and the marginal…

A: Given  Actual real GDP =$13.74 trillion  Potential GDP =$12.69 trillion. Marginal propensity to…

Q: The government spends an additional $926 billion and the marginal propensity to consume is 66%. How…

A: According to the question, it is given that : The government spends an additional $926 billion The…

Q: Suppose John experienced an increase in income of $2,500 due to a tax reduction. Assume that people…

A: Multiplier: Multiplier tells if the autonomous variable (like tax) changes by 1 unit, then by how…