Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 19, Problem 10SQP
To determine
The quantity of spending cut by the government or the taxes that can be increased to avoid inflationary gap by the government.
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suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075. How much must the government increase in spending? Instead of increasing government spending by the amount you calculated what would be the effect of the government decreasing taxes by this amount explain?
Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.5.
how much must the government cut its spending?
b) what would be the effect of the government increasing taxes by this amount?
Assume that initial GDP is $1,000 and we want to expand it to $1,600. Average MPC for the country is 2/3. What should be the new level of government spending if the initial level is $100. Also how much of a tax policy change reach to the same results?
Chapter 19 Solutions
Economics For Today
Ch. 19.4 - Prob. 1YTECh. 19 - Prob. 1SQPCh. 19 - Prob. 2SQPCh. 19 - Prob. 3SQPCh. 19 - Prob. 4SQPCh. 19 - Prob. 5SQPCh. 19 - Prob. 6SQPCh. 19 - Prob. 7SQPCh. 19 - Prob. 8SQPCh. 19 - Prob. 9SQP
Ch. 19 - Prob. 10SQPCh. 19 - Prob. 1SQCh. 19 - Prob. 2SQCh. 19 - Prob. 3SQCh. 19 - Prob. 4SQCh. 19 - Prob. 5SQCh. 19 - Prob. 6SQCh. 19 - Prob. 7SQCh. 19 - Prob. 8SQCh. 19 - Prob. 9SQCh. 19 - Prob. 10SQCh. 19 - Prob. 11SQCh. 19 - Prob. 12SQCh. 19 - Prob. 13SQCh. 19 - Prob. 14SQCh. 19 - Prob. 15SQCh. 19 - Prob. 16SQCh. 19 - Prob. 17SQCh. 19 - Prob. 18SQCh. 19 - Prob. 19SQCh. 19 - Prob. 20SQ
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- Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume (MPC) is given by the formula a. MPC 1. b. (MPC 1)/MPC. c. 1/MPC. d. 1 [1/(1 MPC)].arrow_forwardQuestion #10 - Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.50. How much must the government cut its spending? Instead of decreasing government spending by the amount you calculate, what would be the effect of the government increasing taxes by this amount?arrow_forwardAn inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let's say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume the MPC equals .80. How much will the tax increase be?arrow_forward
- Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?arrow_forwardsuppose the government wishes to eliminate a recessionary GAP of 100 billion and the MPC is .75. How much must the government increase in spending instead of increasing government spending by the amount you calculated? What would be the effect of the government decreasing taxes by this amount explain?arrow_forwardThe MPC is 0.5. what happens to the real GDP if the government increases spending by $10 million?arrow_forward
- MPC is 0.60. To increase GDP by $360, how much should we decrease taxes?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_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_forward
- The government spends an additional $668 billion and the marginal propensity to consume is 79%. How much will GDP increase due to this additional government spending? Enter your answer in billions and round to two decimal places.arrow_forwardSuppose the MPC = 0.6? What will be the government spending multiplier? If, in this economy, government spending (G) increases by $300, what will happen to Total Spending? Show your workarrow_forwardsuppose the government wishes to illuminate recessionary GAP of 100 billion and the MPC is .75. How much must the government increase in spending instead of increasing government spending by the amount you calculated what would be the effect of the government decreasing taxes by this amount explain?arrow_forward
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