According to the Keynesian cross model, if the marginal propensity to consume is 0.75, by how much (i.e. how many billion dollars) will income increase if the government increases government purchases by $120 billion? Hint: Enter only the number of billions and no dollar sign in your response (e.g. enter only '100' in the case of $100 billion). billion
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- In the Keynesian model, if the economy is experiencing a recessionary gap of $825 billion and the marginal propensity to save is .20, which one of the following combinations of spending and taxing changes should the government implement in order to eliminate the gap? 1. Increase government spending by $350 billion and decrease taxes by $350 billion. 2. Decrease government spending by $125 billion and increase taxes by $50 billion. 3. Decrease government spending by $250 billion and increase taxes by $150 billion. 4. Increase government spending by $600 billion and decrease taxes by $225 billion. 5. Increase government spending by $100 billion and decrease taxes by $100 billion. 6. Increase government spending by $125 billion and decrease taxes by $50 billion.According to the Keynesian-cross analysis, if the marginal propensity to consume is 0.75 and government expenditures increased by 100 while taxes are cut by 100, equilibrium income will rise by: Group of answer choices 0. 100. 200. 700.In an economy, marginal propensity to consume (MPC) is 0.75 where Keynesian model works. Now, if government increases both its expenditure and taxes by 1000, then Income increases by 4000; Income increases by 3000; Income increases by 1000; Income do not change?
- In the Keynesian cross model, assume that the consumption function is given by C = 100 + 0.75(Y - T). If government spending increases by AG = 100, what is the increase in output? How does your answer change when the spending increase is financed by an equal increase in taxes?According to the Keynesian cross model if the marginal propensity to consume is 2/3, cut in taxes of 120 Billion increases equilibrium income by a) 160 Billion b) 180 Billion C) 240 Billion d) 360 BillionUse the Keynesian Model to answer this set of questions. Suppose that in the economy under consideration the consumption function can be written as C=200+.8(Y-T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X-M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Y, from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why. (d) Full employment output in this economy (Y) is equal to $2000 what do you predict is happening to inventories if the full employment level of…
- In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4;(2) The marginal propensity to save is -420; (3) At an income level of R1 000, the value of savings is 250;(4) At an income level of R1 000, the level of savings is -170.Q.1.7 In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4; (2) The marginal propensity to save is -420;If the Keynesian consumption function is C = 100 +0.75Y4 and there is no investment then, when disposable income is 500, what is the average propensity to consume? Round your answer to 2 decimal places e.g. 2.22
- Use the Keynesian cross model to predict the impact of an increase in government purchases on equilibrium GDP. State the direction of the change and give a formula for the size of the impact. An increase in taxes shifts the planned expenditure function downward. The change in income is given by AY= ΔΥ= -MPC 1-MPC An increase taxes shifts the planned expenditure function upward. The change in income is given by -MPC 1-MPC AY= XAT An increase in taxes shifts the planned expenditure function inward. The change in income is given by AY= 1 1-MPC XAT 1 1-MPC The direction of the shift is undetermined without knowing the slope of the PE function. The change in income is given by XAT XATThe accompanying graph represents the Keynesian cross for a country, where the planned aggregate spending line (Planned AE) is graphed against a 45° line. Suppose that there is an autonomous decrease in aggregate spending of $40 billion in this country. a. Show this change on the graph (you can drag and shift the whole line or either of the endpoints) and answer the following two questions. b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. billion dollars c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. following two questions. vay and answer the b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. billion dollars c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. billion…Suppose the marginal propensity to consume is 0.6. Use the Keynesian Cross model to predict the impact on equilibrium income of each of the following policies. State the direction of the change and give a formula for the size of the impact. a. an increase in government purchases of $100billion b. an increase in taxes of $100 billion c. a $100 billion increase in both government purchases and taxes?