ESSENTIALS OF ECONOMICS
11th Edition
ISBN: 9781260225334
Author: SCHILLER
Publisher: RENT MCG
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Question
Chapter 2, Problem 6QFD
To determine
Possible effects ofprogressive taxes on the total output.
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Our economics have redone their calculations. They now estimate that citizensin our country have an MPC of 0.60. We can fix the problem by decreasing GDP by 250. How much should we increase taxes?
if actual real GDP is greater than the equilibrium level of real gdp what happens to restore equilibrium to the economy?
MPC is 0.60. To increase GDP by $360, how much should we decrease taxes?
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- Alien Advisor Our economists have redone their calculations. They now estimate that citizens in our country have an MPC of 0.80. We can fix the problem by decreasing GDP by 850. How much should we increase taxes?arrow_forwardHow do you recommend the government change GDP and taxes to stabilize the economy in each of the following scenarios? Economic growth has started slowing and the unemployment rate has increased over the past four months. There has been strong growth in GDP over the past year, unemployment is very low, and inflation has started to rise. Prices are stable, unemployment is low and the economy is growing at an average rate.arrow_forwardThe government of a country decides to double its current level of spending, causing real GDP to increase from $20,000 to $120, 000. What is the percent change in real GDP?arrow_forward
- If the government spending increases, will net exports (X-M) increase?arrow_forwardIf the government wants to increase real GDP levels, it could A) decrease government expenditures and increase taxes. B) increase government expenditures. C) decrease government expenditures. D) increase taxes.arrow_forwardIf the MPC IS 0.9 What should the government do to increase GDP by $4500?arrow_forward
- The Social Security system levies a tax on workers and pays benefits to the elderly. Suppose that congress increases both the tax and the benefits. For simplicity, assume that the Congress announces that the increases will last for one year only. a. How do you suppose this change would affect the economy? (Hint: Think about the marginal propensities to consume of the young and the old.) b. Does your answer depend on whether generations are altruistically linked?arrow_forwardWhy does a $100 billion dollar increase in government spending increase output by more than $100 billion?arrow_forwardSuppose the MPC in an economy is 0.95. What should the government do with taxes if they want to increase Total Spending by $665? Show your workarrow_forward
- You have the following information. Calculate equilibrium GDP and enter your number in the box below. C = 200 + 0.75YD | = 800 G = 600 The government has a balanced budget.arrow_forwardTrue/False: Suppose that in the graph showing L (in the x-axis) and MPL (in the y-axis), the MPL function is a horizontal line (zero slope). This means that the production function is increasing. true or false?arrow_forwardWhat would happen to the level output income if the government increase tax collections on personal income by 100 billion and spent the entire mouth. Assume MPS equals .20.arrow_forward
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