An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 • Autonomous expenditure = 500 • Potential GDP = 1500 1. The aggregate expenditure function is thus AE = 500 0.6 Y. 2. The multiplier is 1
Q: MPC = .75 What is the value of the multiplier?
A: MPC=0.75 MPS=1-0.75 =0.25
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Q: An economy with no government is described by the following: • Marginal propensity to consumer = 0.8…
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I could use some help finding the government's budget balance. Questions 4-7.
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- An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 Autonomous expenditure = 500 • Potential GDP = 1500 %3D %3D 1. The aggregate expenditure function is thus AE = Y. 2. The multiplier is 3. Equilibrium GDP is Y = 4. The output gap is 5. There is a output gap. Suppose now a iblished: recessionary • Tax rate = 12, inflationary • Government noThe graph shows the income-expenditure model for the country of Mireland, where AE represents aggregate expenditure. The Mirsh government wants to cut spending owing to a huge budget deficit and, as such, decides to reduce infrastructure spending by $6.25 billion. Show the impact of this spending cut given a marginal propensity to consume (MPC) of 0.5 and a total tax take of one-quarter in any changes in GDP. In this example, assume that there is no international trade or inflation, and that interest rates are fixed. Planned aggregate spending (in billions of dollars) 2888898828220 70 65 60 50 45 40 30 25 15 10 45 degree line A new government is elected in Mireland and decides to make even deeper cuts in direct spending, totaling $14 billion. What will be the total change in real GDP? Please provide the answer to the nearest whole billion. Planned AB 05 10 15 20 25 30 35 40 45 50 55 60 65 70 Real GDP Gn billions of dollars) total change in real GDP: $ 10 billion Enter numeric valueAn economy has the following consumption function: C=$200+0.8DI . The government budget is balanced, with government purchases and taxes both fixed at $1,000. Net exports are $100. Investment is $600. 1. The value of equilibrium in this model is . 2. If government spending increases by $150, the equilibrium value increases by , demonstrating a multiplier value of . 3. If both G and T rise by $150 at the same time, the equilibrium Y will increase by
- Consider an economy in which the marginal propensity to consume is 0.8 and GDP is currently at 12,000. a) The government wishes to increase GDP to 13,000, and it is considering changing only one of its fiscal tools: 1. government purchases 2. taxes 3. transfer payments How much would the government have to change each of these fiscal policy tools to achieve its goal? (Use the simple spending multiplier for this part and below.) b) Suppose instead that the government wishes to reduce GDP to 10,000, and again, it is considering using only one of its three available fiscal policy tools. How much would it change each of these fiscal tools to achieve its goal?18. If MPC = 0.65, find the government spending multiplier. If government spending increases by 100, what will be the change in Y? Will Y increase or decrease? What will be the new Y (Y2) if you are given that Y1 is 500?Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 Y=1700 consumption=1200 7) Imagine the government would like to increase equilibrium GDP to 2,000, what would it have to set the level of government spending to? 8) What is the size of the spending multiplier? 9) What is the size of the tax multiplier?
- Suppose the following data for an economy; a consumption function of C = 800 + 0.8Yd, Investment spending is fixed at 300, Government purchases are 400, and net taxes are 100. A.) What is the MPC, MPS, and the value of the tax multiplier? B.) Suppose government increases taxes by 100, use the corresponding multiplier to calculate the new equilibrium level of income. C.) Check to ensure that the multiplier worked (confirm algebraically that your answer in B is correct, that is, solve for the new equilibrium level of income (Y)).Suppose there is some hypothetical closed economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The marginal propensity to consume (MPC) for this economy is _____ , and the spending multiplier for this economy is _____ Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to $______ billion. This decreases income yet again, leading to a second change in consumption equal to $________ billion . The total change in demand resulting from the initial change in government spending is $ ________ trillion. The following graph shows the aggregate demand curve (AD1AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2AD2) after the multiplier effect takes place. For simplicity,…Suppose the consumption function is given by C(Y) = 50+0.5 (Y-T), where Y represents income and T represents net taxes. Suppose that the level of government expenditure, G, is 200; net taxes, T, are 200; planned investment, I, is 400. 1)The government expenditure multiplier is: a. -2 b. -1 c. 2 d. 1 The equilibrium level of output is: a. 850 b. 1500 c. 900 d. 1100
- 5. Suppose Bard is its own macroeconomy functioning at full employment. The marginal propensity to consume at Bard is 0.5. Autonomous consumption at Bard is $200. Government spending is $100. Intended investment is $100. a) Calculate the spending multiplier at Bard. Calculate the tax multiplier. Why is the tax multiplier small than the spending multiplier? 0001 b) Calculate and show graphically equilibrium output and income at BardConsumption function: C = 60 +0.75Yd • Investment: 1 = 90 • Government spending: G = 52 Net taxes: T=0.2Y - 25 Disposable income: Y=Y-T • Equilibrium: Y=C+I+G Equilibrium income is $. (Round your response to one decimal place.) In equilibrium, the government collects net taxes of (Round your response to one decimal place.) $ In equilibrium, the government's budget deficit or surplus is $. (Round your response to one decimalSuppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion, and specify decreases as a negative number. By how much will government spending change? change in government spending: $ What is the resulting change in the equilibrium level of real GDP? change in equilibrium level of real GDP: $ billion billion