Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 21, Problem 4SQ
To determine
The government expenditure required to retain the full employment level in the economy.
Expert Solution & Answer
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Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. If
the current actual Real GDP is at $300 million,.
government spending by
would bring the economy to
full employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $
54,054,054.05 d) increasing: $54,054,054.05
If the Marginal Propensity to Consume is 0.8, this means that
For each $1 increase in income, residents will increase their consumption by 20 cents.
For each $1 increase in government purchase, spending in the economy will increase by $4.00.
For each $1 increase in taxes, spending in the economy will decrease by $5.00.
For each $1 increase in taxes, spending in the economy will increase by $4.00.
For each $1 increase in taxes, spending in the economy will decrease by $4.00.
Assume the economy is currently experiencing a 100 billion-dollar recessionary gap.
Furthermore, assume the marginal propensity to consume is .80. In order to eliminate the
recessionary gap, the federal government needs to change taxes by
billion.
Important: Enter your solution as either a positive or negative number. If the answer was -7
billion, just enter -7. Do not enter -7,000,000,000.
Chapter 21 Solutions
Economics For Today
Ch. 21.3 - Prob. 1YTECh. 21 - Prob. 1SQPCh. 21 - Prob. 2SQPCh. 21 - Prob. 3SQPCh. 21 - Prob. 4SQPCh. 21 - Prob. 5SQPCh. 21 - Prob. 6SQPCh. 21 - Prob. 7SQPCh. 21 - Prob. 8SQPCh. 21 - Prob. 9SQP
Ch. 21 - Prob. 10SQPCh. 21 - Prob. 11SQPCh. 21 - Prob. 1SQCh. 21 - Prob. 2SQCh. 21 - Prob. 3SQCh. 21 - Prob. 4SQCh. 21 - Prob. 5SQCh. 21 - Prob. 6SQCh. 21 - Mathematically, the value of the tax multiplier in...Ch. 21 - Prob. 8SQCh. 21 - Prob. 9SQCh. 21 - Prob. 10SQCh. 21 - Prob. 11SQCh. 21 - Prob. 12SQCh. 21 - Prob. 13SQCh. 21 - Prob. 14SQCh. 21 - Prob. 15SQCh. 21 - Prob. 16SQCh. 21 - Prob. 17SQCh. 21 - Prob. 18SQCh. 21 - Prob. 19SQCh. 21 - Prob. 20SQ
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