Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 21, Problem 8SQ
To determine
The implication of the tax multiplier with value -4.30.
Expert Solution & Answer
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The government lowers $0.9 trillion in taxes, restoring GDP from $10 trillion to its potential level of $11.2 trillion.
What is the value of the tax multiplier?
A
-1.33
B
-0.9
C
-0.75
D
-1
E
-1.2
If the MPC is 0.5, the tax multiplier is
Select one:
a. -1
b. -2.5
C. -1.67
d. -2
What's the tax multiplier if MPC = 0.75?
Select one:
a. -4
b. -3
С. 3
d. 0.33
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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- Government spending in Robok is $140 billion, and its only tax is an income tax with a marginal tax rate of 0.2. a. The balance on the government's budget at a GDP level of $450 billion is a (Click to select) : of $ billion. b. The balance on the government's budget at a GDP level of $800 billion is a ( (Click to select) : of $ billion. C. At what level of GDP will the economy of Robok have a balanced budget? Robok will have a balanced budget at a GDP level of $ [ ]billion.arrow_forwardSuppose that real GDP for an economy is currently 16,000 billion, the government purchases multiplier is 2.2 and the tax multiplier is -1.2. If the government deploys additional spending of 600 billion and cuts taxes by 120 billion, where will GDP end up (in billion)?arrow_forwardB9arrow_forward
- 1. Consider an economy with the following situation: C = 50 +0.8 Yd =100;T= 100 G =150 a. Solve for Y, C, S b. How much is investment and government multiplier? Tax multiplier? c. Suppose full employment income is 900. Is this an inflationary or deflationary gap? How much is the gap? d. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. e. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?arrow_forwardA. If your MPC = 0.6 and government spending (G) increases by $800. What will happen to the equilibrium income? The Effect of Taxation: Tax Multiplier = -MPC X Spending Multiplier Problems: B. If the MPC = 0.8 and taxes go up by $1000, what will happen to the equilibrium income? Please fully complete both problems.arrow_forwardGovernment spending in Robok is $90 billion, and its only tax is an income tax with a marginal tax rate of 0.15. a. The balance on the government's budget at a GDP level of $380 billion is a (Click to select) v of $ billion. b. The balance on the government's budget at a GDP level of $700 billion is a (Click to select) v of $ billion. C. At what level of GDP will the economy of Robok have a balanced budget? Robok will have a balanced budget at a GDP level of $ billion.arrow_forward
- Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000arrow_forwardIf the tax multiplier is -5 and taxes are reduced by $200 billion, output falls by $1000 billion. falls by $40 billion. increases by $40 billion. increases by $1000 billion.arrow_forwardIf the tax multiplier is -4 and taxes are reduced by $35 billion, output 1. falls by $140 billion. 2. increases by $140 billion.arrow_forward
- Suppose that real GDP is currently $17.1 trillion, potential GDP is $17.4 trillion, and the tax multiplier is -1.6. Byhow much will taxes have to change to bring the economy to equilibrium at potential GDP?arrow_forwardIf the MPS in an economy is 0.2. What is the tax multiplier? Group of answer choices a. 4 b. 5 c. -4 d. -5arrow_forwardWhat is the effect of an increase in taxes when the economy is above full employment? What is the magnitude of the tax multiplier? An increase in taxes when the economy is above full employment _______ aggregate demand and real GDP, and the price level _______. A. increases; falls B. increases; rises C. does not change; does not change D. decreases; falls The magnitude of the tax multiplier is equal to _______. A. MPC times the government expenditure multiplier B. the government expenditure multiplier divided by MPC C. MPC D. the government expenditure multiplierarrow_forward
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