The equilibrium income.

Question

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Answer 1

Question

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

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Students have asked these similar questions

7. Suppose in the Simple Keynesian model that the marginal propensity to consume is b = 0.75. If both taxes, T, and government spending, G, are increased by $400, then equilibrium Y O decreases by $1,200. increases by $1.600. increases by $400. neither increases nor decreases. none of the other options.

Suppose the marginal propensity to consume is 0.6. Use the Keynesian Cross model to predict the impact on equilibrium income of each of the following policies. State the direction of the change and give a formula for the size of the impact. a. an increase in government purchases of $100billion b. an increase in taxes of $100 billion c. a $100 billion increase in both government purchases and taxes?

Suppose that the government increases its spending by 50$. If the MPC (marginal propensity to consume) in the economy is 0.5, then according to the Keynesian cross output will a. Increase by 70$ b. Decrease by 100 c. Increase by 100$ d. Not change

Answer 2

Question

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

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Answer 3

Question

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

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Answer 4

Question

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

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Answer 5

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

Answer 6

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

Answer 7

Chapter 11, Problem 1QQ

To determine

The equilibrium income.

Answer 8

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (d):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (d) is correct.

Option (a):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (a) is incorrect.

Option (b):

The increases in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus, option (b) is incorrect.

Option (c):

The increase in equilibrium income due to an increase in government purchase can be calculated as follows:

First, calculate the government spending multiplier.

The mulitiplier=1(1−MPC)=1(1−23)=3

Therefore, the value of government spending multiplier is 3.

Now, the increase in equilibrium income due to an increase in government purchase can be calculated as follows:

Changes in income=$120×3=$360

Therefore, the equilibrium income increases by $360 million.

Thus option (c) is incorrect.

Answer 12

Economics Concept Introduction

Government spending multiplier: The government spending multiplier indicates the ratio of change in equilibrium income to the change in government spending.

Answer 13

Ch. 11 - Prob. 1QQ Ch. 11 - Prob. 2QQ Ch. 11 - Prob. 3QQ Ch. 11 - Prob. 4QQ Ch. 11 - Prob. 5QQ Ch. 11 - Prob. 6QQ Ch. 11 - Prob. 1QR Ch. 11 - Prob. 2QR Ch. 11 - Prob. 3QR Ch. 11 - Prob. 4QR

The equilibrium income.

The equilibrium income.

Answer to Problem 1QQ

Explanation of Solution

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Chapter 11 Solutions