Sub-part
A
The impact of changes in real GDP demanded in case MPC is 0.9
Concept Introduction:
Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate
Sub-Part
B
The impact of changes in real GDP demanded in case MPC is 0.8
Concept Introduction:
Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the macroeconomic indicators like inflation, unemployment, GDP growth rate.
Sub-Part
C
The impact of changes in real GDP demanded in case MPC is 0.75
Concept Introduction:
Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the macroeconomic indicators like inflation, unemployment, GDP growth rate.
Sub-Part
D
The impact of changes in real GDP demanded in case MPC is 0.6
Concept Introduction:
Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the macroeconomic indicators like inflation, unemployment, GDP growth rate.
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Chapter 11 Solutions
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- Can you assist with solving the following question, I do not understand how the calculation works. Thanks Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion. 0.9 0.8 0.75 0.6arrow_forwardWhy will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a) Because people viewed the tax increase as permanent. b) Because people chose to increase their saving. c) Because people viewed the tax increase as temporary. d) consumption expenditures are not related to the level of taxation.arrow_forwardAssume that in the economy of Utrea, the MPC is 0.8 and the multiplier is 3 and that both government spending and autonomous taxes are increased by $40. In what direction and by how much will equilibrium GDP change?arrow_forward
- What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary? Assume that the MPC is 0.9.arrow_forwardSuppose an economy is depicted by the expenditure function provided below: C + G + I + X = $200 + 0.80×Y + $350 + $225 + $125 All figures are in billions of dollars. Assume there are no taxes in this nation so disposable income Yd = Y. The economy reaches an equilibrium at $enter your response here billion. (Enter your answer as a whole number)arrow_forwardSuppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The government wants to increase real GDP demanded to $19 trillion at the given price level. By how much would it have to increase government purchases to achieve this goal?arrow_forward
- Assume an MPC of 0.9. The change in total spending for the economy as a result of a $100 billion new government spending injection would be: A) $90 billion B) $80 billion C) $900 billion D) $800 billionarrow_forwardConsider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?arrow_forwardWhat 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.arrow_forward
