Calculate the government purchases multiplier (to one decimal place) if the marginal propensity to consume is 0.18, the tax rate is 0.27, and the marginal propensity to import is 0.13. Your Answer:
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- The marginal propensity to consume (MPC) for this econamy is . and the spending multiplier for this economy is Suppose the govemment in this economy decides to decrease govemment purchases by $250 bilion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to second change in consumption equal to This decreases income yet again, causing a The total change in demand resulting from the initial change in government spending is The following graph shows the aggregate demand curve (AD ) for this economy before the change in govemment spending. Use the green line (trangie symbol) to plot the new aggregate demand curve (AD:) after the multiplier effect takes place. For simplioity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD) is paralel to the initial aggregate demand curve (AD). You can see the slope of AD by selecting t on the graph. 540 AD. AD, 130 100 OUTPUT (Tions of…Derive the expenditure multiplier using the lump sum taxes (or fixed sum)Calculate the government spending multiplier and the tax multiplier if the MPC is 0.6. Show your work
- If the MPC is 0.5, the tax multiplier is Select one: a. -1 b. -2.5 C. -1.67 d. -2For an econmomy with a MPC of .80 the multiplier will be 5 4 a magnitue of 1 less than the tax multiplier determined by the elasticity of the money supply14. The economy is experiencing a $225 million inflationary gap. If the government 02 decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC=0.9, what magnitude of tax change would be appropriate?
- Suppose initially the marginal propensity to consume in an economy is 0.75 and the tax rate is zero. In order to increase revenue, the government now introduces income tax at the rate of 20 per cent of the income. This change would cause multiplier to * Go up by 60% Go down by 60% O Go up by 37.5% Go down by 37.5%suppose the government wishes to illuminate recessionary of a gdp of 100 billion in the MPC is .075. How much must the government increase in spending? Instead of increasing government spending by the amount you calculated what would be the effect of the government decreasing taxes by this amount explain?Suppose the MPC in an economy is 0.95. What should the government do with taxes if they want to increase Total Spending by $665? Show your work