Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 26, Problem 4DQ
To determine
The multiplier chain.
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List the 3 major revenue sources and 3 major expenditures in the 2022-2023 U.S. budget.How much (approximate %) of the budget is NOT mandatory, interest or defense spending.What is meant by the term “mandatory” in this context? How do you think that this realistically affects efforts to balance the budget?.
Which best describes why the multiplier exists?
When people spend money, that money ends up in the pockets or bank accounts of other people or organizations, who
then use that money in some way.
The multiplier exists because money spent today is always more valuable than money spent in the future, due to
inflation and interest rates.
When people see other people spending money, they know that the economy is about to improve, leading them to spend
more money.
When people see the government spending more money, they realize that the government thinks that prices are low;
thus, they believe it is a good time to buy things.
2) Fred has income of $100,000 this year and $120,000 next year. Fred can borrow at an
interest rate of 8% or lend at an interest rate of 2%. Draw Fred's budget constraint
between spending this year and spending next year labeling all significant points.
Chapter 26 Solutions
Economics: Principles and Policy (MindTap Course List)
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- Kefer to the following graph to answer the question that follow. Interest rate Line 1 6% 5% Line 2 $300 Savings and investment (billions of dollars) In the figure, at an interest rate of 4%, the: $200 quantity demanded of loanable funds equals the quantity supplied of loanable funds, and equilibrium is reached. quantity demanded of loanable funds is greater than the quantity supplied of loanable funds, and there is a surplus of loanable funds. demand for loanable funds is greater than the supply of loanable funds, and there is a shortage of loanable funds: quantity demanded of loanable funds is greater than the quantity supplied ofarrow_forwardThe cost of rebuilding the Philippines after typhoon Haiyan could reach USD 5.8bn”, a senior official has said. Assume the government of Australia Department of Foreign Affairs and Trade provided a grant of USD 5.8 billion. Also assume that despite the hardships the Philippine families experienced, 15% was the beneficiary savings from the Australian grant. Further, assume all other factors remain constant.a. Calculate the total effect of the spending multiplier of the Australian government grant on the Philippine economy GDP growth. b. Examine the overall multiplier effect of the USD5.8 billion grant on the Philippine economy. Answer asap n correctly with proper typed explanationarrow_forwardPlease give correct answer , take question if 100% surearrow_forward
- If I had a federal budget that was typically balanced where new taxes causes $100 billion surplus. What would happen to the interest rates? and do saving and investments change because of it?arrow_forwardStep 5: to calculate your net worth. Determine whether your net worth is a surplus (positive number) or a deficit (negative number). Figure 7.4 Drawing up a Statement of Net Worth Activity 7.4 Alliyah has asked you to help her calculate her net worth. She has made a list of all the things in her room. Use this list to draw her Statement of Net Worth. up Alliyah's stuff Item (12) Bed Jacket MP3 player CDs Lamp Nike shoes Value R500 R1 000 R200 R200 R150 R500 R200 R1 000 Cellphone Computer Remember, a person's net worth can change daily depending on what that person does with his or her money. To keep with changes in your net worth, you can use a spreadsheet. up When you do a Statement of Net Worth, there are always two entries for each change. If Alliyah pays R50 for a CD, her bank balance will decrease by R50, and so will her net worth. Expenses decrease net worth. Income increases net worth.arrow_forwardAnswer the last questionarrow_forward
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- 11. The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed several relief packages (the Economic Stimulus Act of Act of 2009) that combined would deliver about $700 2008 and the American Recovery and Reinvestment billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made directly to consumers. The objective was to boost the economy by increasing the disposable income of American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if MPC in the United States is 0.5. Then calculate the resulting change in real GDP arising from the $700 billion in payments. 76177 b. Illustrate the effect on real GDP with the use of a graph depicting the income-expenditure equilib- rium. Label the vertical axis “Planned aggregate spending, AE Planned" and the horizontal axis "Real GDP." Draw two…arrow_forwardI just need help on f g and harrow_forwardWhen making choices between spending or saving, how might these decisions impact the aggregate (national) economy?arrow_forward
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