please solve parts c and d 5. Suppose Bard is its own macroeconomy functioning at full employment. Themarginal propensity to consume at Bard is 0.5. Autonomous consumption at Bardis $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?0001b) Calculate and show graphically equilibrium output and income atBard c) Suppose a crisis in consumer confidence decreases autonomousconsumption to $100. Show graphically and calculate new output andincome.d) What size and type (be specific) of policy would bring the economyback to full-employment output?

Full employment level is achieved where LRAS=AD = SRAS . beyond the level of Full employment output…

c) Suppose a crisis in consumer confidence decreases autonomous consumption to $100. Show graphically and calculate new output and income. d) What size and type (be specific) of policy would bring the economy back to full-employment output?

c) Suppose a crisis in consumer confidence decreases autonomous consumption to $100. Show graphically and calculate new output and income. d) What size and type (be specific) of policy would bring the economy back to full-employment output?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.5P: Explain the difference between the government purchases multiplier and the net tax multiplier. If...

See similar textbooks

Related questions

Q: Stock Market Prices: Demand and supply in Action Firms that are quoted on the stock market can raise…

A: A stock market, sometimes also known as an equity market or a share market, is a place where buyers…

Q: QUESTION 14 When there is a technological advance in the cheese industry, consumer surplus in that…

A: Q14) "Consumer surplus reflects the difference between the buyer's willingness to pay and the market…

Q: Draw a downward-sloping demand curve for labor and an upward-sloping supply curve of labor in a…

A: Labour demand and labour supply curve are very significant in the determination of real wage rate .…

Q: Question 4: ( Suppose an economy is in its steady state with k° = 49.38. Imagine it has the…

A: Introduction Given economy is in steady state. Let production function: Y = L1/2 K1/2 Now divide the…

Q: Davao International Airport has crafted estimates for the upgradıng of security systems. Will the…

A: Given that; Interest rate= 10%

Q: Industrialization should start from a sound agricultural base. Why? What could be a contribution of…

A: Industrialization should begin with a strong agricultural foundation since it allows fewer farmers…

Q: An individual has a utility function, U(q,,42) = Jq1•92). (Mathematical assistance: x = x2). Derive…

Q: 1. What happens to the demand curve for labor in the following situations: a) On factory workers:…

A: When demand increases, the demand curve shifts to the right, and when demand decreases, the demand…

Q: 5. Suppose food (F) and clothing (C) are produced using only labor. The production functions are…

A: In economics, a production function refers to an equation that represents the connection between the…

Q: Macroeconomists would suggest that an economy experiencing high unemployment should adopt policies…

A: Macroeconomists deals with national issues like unemployment, GDP and Inflation

Q: QUESTION 21 A decrease in price will increase consumer welfare or consumer surplus due to a. New…

A: Q21) "A decrease in price increases the consumer surplus."

Q: QUESTION 1 When a product becomes more fashionable, what does happen in the market? a. Total surplus…

A: Q1.) "Total surplus is the sum of producer surplus and consumer surplus."

Q: QUESTION 22 The total surplus in a market reaches its maximum when supply and demand are in…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: If the price is set to P1, what area represents the producer surplus in the graph shown above? D B +…

A: Producer surplus refers to the total amount of money earned by a producer that is above the minimum…

Q: Question 9 A firm has a cost function cL, K) = wL + rK with a production function pL,K) = AL“ K® .…

A: Lagrange approach is used to minimise or maximise a function subject to a constraint

Q: The price-demand equation, D(x), and the price-supply equation, S(x), of a Slow Cooker are given…

A: Since you have posted a question with multiple subpart, we will solve first three subpart for you.…

Q: Total Revenue Change in profit (£) Total Marginal Output (Units) Profit Marginal cost (£) cost (£)…

A: Marginal revenue is the additional revenue earned by selling an additional unit of output. Marginal…

Q: Imagine a hypothetical consumer is using all of their income on two goods, X and Y. The price of…

A: Given Price of good X =$2 Price of good Y= $10 Additional units of utility from another unit of…

Q: A competitive firm maximizes profit when marginal cost: a. equals the price. b. is less than the…

A: There are many firms offering the same identical products in a market system with perfect…

Q: 1. An individual has a utility function, U(q,42) = /91 q2). %3D (Mathematical assistance: x = : (a)…

A: We have given utility function U = (q1q2)1/2 where p1 and p2 are prices of q1 and q2.

Q: What happens to either the supply or demand curves for labor in the following situations: a) On…

A: Disclaimer :- As you posted multipart question we are supposed to solve the first 3 parts only as…

Q: 2P + 4M = 200 se that people prefer to eat two potatoes with every pound of mea of each product will…

A: In economic matters and other sociologies, preference is the demand that a specialist provides for…

Q: Accounting profits are: A.) economic profit less explicit costs. B.) less than economic…

A: "There are two kinds of costs explicit costs (are out of the pocket costs for a firm) and implicit…

Q: Enumerate at least 5 occupations/job that is consider as part of Labor Shortage. Discuss briefly…

A: The concept that depicts the insufficient candidates for employment in a number of industries in an…

Q: 6. What is role of the government and economic policy during recessions according to Classical…

A: The numerous macroeconomic theories and models of how aggregate demand greatly impacts economic…

Q: ompute the number of periods in order that the capital recovery factor for a uniform payment series…

A: A/P = 0.1424564 r = 6% compounded semianually

Q: 30 25 20 15 10- 1 3 5 6. 8. Labor 10- 4) 2. Marginal Product

A: Marginal product refers to change in total product with respect to change in input. It refers to…

Q: If the social costs of an economic activity are $120 and the private costs are $75. then the…

A: Given: Social Costs = $120 Private Cost = $75

Q: What is leverage ratio and how its applied to Auto Industry?

A: A leverage ratio refers to one of numerous financial metrics that examines how much money originates…

Q: A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea…

A: Elasticity measures the responsiveness of quantity demanded to change in prices.

Q: War Street Journal in 2021 observed, "And, while bitcoin is referred to as a digital currency. it…

A: Digital money is a type of cash that is accessible just in computerized or electronic structure. It…

Q: B. Use the data in the table below to calculate the opportunity cost of moving from production point…

A: Opportunity cost refers to loss that occurs due to giving up the next best alternative while making…

Q: Q. Suppose the exchange rate between the Malaysian ringgit and British Pound is: RM 5.4860/ £.…

A: The rate that depicts the rate at which one currency is measured in terms of another currency in…

Q: Nursing Should public funding be used for prevention programs if money could be saved in the future?

A: Being a part of system-wide efforts to focus on what works best is what prevention entails. This…

Q: Suppose the economy is initially in its long-run equilibrium. Due to the biased (overestimated)…

A: IS-LM model shows money market equilibrium and goods market equilibrium at various levels of…

Q: After World War II, Germany was the only participating country left with its infrastructure intact…

A: The World War II had a significant impact on various participating countries as it resulted in a…

Q: An economy produces three products, bags, computers and shirts. The prices and quantities of these…

A: GDP measures the market value of final goods and services produced by an economy during a given…

Q: The following estimates (in $1000 units) have been developed for a security system upgrade at…

A: Benefit cost ratio shows the relation among relative cost and the benefit or advantage of the…

Q: 45. Use the graph to answer the question that follows. Which of the following can cause the…

A: Answer is given below

Q: Q1) Consider the following information for product A and related product B in consumption: Quantity…

A: Formula to calculate price elasticity:- Ed=Change in quantity demandedAverage of quantity of AChange…

Q: Bob's lawn mowing service is a profit maximizing, competitive firm. Bob mows lawns for $27 each. His…

A: Total cost is the sum of Fixed cost and variable cost. Fixed cost remains same at all levels of…

Q: Assume that Peter's short run Total Cost Curve is TC = 20,000q- 200q² +q*. Calculate his (short run)…

A: Average total cost is total cost divided by quantity. ATC = TC / q => ATC = (20,000q - 200q2 +…

Q: 1. An individual has a utility function, U(q,,92) = J91 92). (Mathematical assistance: Vx = (a)…

A: We have cobb Douglas utility function whith given price p1 and p2.

Q: How would the creation of an import quota affect the market for a good? Imported supply increases…

A: Import quota puts restrictions on quantity that can be imported.

Q: The government can achieve permanent higher growth rates by having two determinants of growth. The…

A: There are two determinants that can achieve permanent and higher economic growth. Capital…

Q: Jimmy just graduated from a top medical school and is currently deciding which hospital emergency…

A: Unemployment refers to the state in which a person does not have any job even though he is actively…

Q: ) What is the Service Corps of Retired Executives (SCORE)? How does it assist small-business owners?…

A: The Service Corps of Retired Executives (SCORE) refers to a non-profit organization whose members…

Question

please solve parts c and d

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
Bard

c) Suppose a crisis in consumer confidence decreases autonomous
consumption to $100. Show graphically and calculate new output and
income.
d) What size and type (be specific) of policy would bring the economy
back to full-employment output?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?
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 Bard
1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities:a. Government expenditures at the equilibrium level of income if T = $160 and I = $100.b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier?c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending multiplier?d. Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
7) Define the tax multiplier and give the algebraic expression.8) Assume that the government spending multiplier is equal to 4. Calculate the tax multiplier from thisinformation.9) Calculate how much output would expand by if the government increased spending by $500 billion and financedthis spending by increasing lump-sum taxes by the same amount.
The following graph shows the aggregate demand curve. Shift the aggregate demand curve on the graph to show the impact of a tax hike. (?) 130 Aggregate Demand 120 110 100 90 Aggregate Demand 80 70 10 20 30 60 OUTPUT Suppose the governments of two different economies, economy J and economy K, implement a permanent tax cut of the same size. The marginal propensity to consume (MPC) in economy J is 0.85 and the MPC in economy K is 0.8. The economies are identical in all other respects. The tax cut will have a larger impact on aggregate demand in the economy with the PRICE LEVEL
K Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C = 300+ 0.90(Y-T) Suppose further that investment spending is fixed at 1 = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y= (Round your response to two decimal places.)
K Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C=300+0.90(Y-T) Suppose further that investment spending is fixed at 1 = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = (Round your response to two decimal places.) Y=
Consider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?
16. Suppose that planned investment and planned government purchases do not depend on income:I = 15 and G = 17. Consumption, as you would expect, does depend on income via the consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12. Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best description of this situation? a. the (Y, AE) point is above the 45 degree line, Y will adjust down b. the (Y, AE) point is above the 45 degree line, Y will adjust up c. the (Y, AE) point is below the 45 degree line, Y will adjust down d. the (Y, AE) point is below the 45 degree line, Y will adjust up 17. (continued) Help you friend by calculating the equilibrium income for the AE model in the previous question. Y = _____
Help me please
The economy of Godzillaland is represented by the following:C=50+0.25Y d , T=1000, G=1000, I=100 (a) Calculate the equilibrium level of output. Graph your solution. (b) If the government spending increases by 50 what is the new equilibrium level of output? Use the government spending multiplier. (c) If the government increases taxes by 50 what is the new equilibrium level of output? Use the tax multiplier. (d) If the government increases taxes and spending by 50 what is the new equilibrium level of output? (e) Calculate the equilibrium level of output in case where taxes depend on income according to the following: T=-25+0.125Y.
Suppose 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)?