If the MPC in an economy is 0.6, government could shift the aggregate demand curve rightward by $30 billion by Multiple Choice decreasing taxes by $20 billion. increasing government spending by $20 billion. increasing government spending by $18 billion. decreasing taxes by $30 billion.

If the MPC in an economy is 0.6, government could shift the aggregate demand curve rightward by $30 billion by Multiple Choice decreasing taxes by $20 billion. increasing government spending by $20 billion. increasing government spending by $18 billion. decreasing taxes by $30 billion.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 1WNG

See similar textbooks

Related questions

Q: Suppose that there are no crowding out effects and the MPC is .7. By how much must the government…

Q: Explain the difference between a closed economy fiscal multiplier and an open economy fiscal…

A: Difference between a closed economy fiscal multiplier and an open economy fiscal multiplier:…

Q: Assume the marginal propensity to consume (MPC) is 0.6 and the government increases taxes by $30…

A: In Keynesian macroeconomics, the changes in aggregate demand in the economy are able to affect the…

Q: Suppose the economy currently has an inflationary gap. The Federal Government engages in…

A: Contractionary fiscal policy has two important tools that are reducing money supply and increasing…

Q: 21) "A $10 billion increase in taxes and a $30 billion cut in government spending" is the example of…

A: Fiscal policies are the ones that are related to the collection of revenue and decision of spendings…

Q: Consider an economy described by the following equations: C = 300 + 0.90 (Y – T)…

A: Government spending multiplier = 1 / 1 - MPC Government spending multiplier = - MPC / 1 - MPC

Q: A short-run AS/AD economy has an AS/AD spending multiplier of 2.0 and an income tax rate of t = 0.3.…

A: Spending multiplier refers to the multiplier effect of change in spending on the total output.…

Q: If the tax multiplier is -5 and taxes are reduced by $200 billion, output falls by $1000 billion.…

A: Given Tax multiplier = -5 Reduction in Taxes = 200 Billion$ with reduction in taxes there is…

Q: Suppose the Malaysian economy is in equilibrium at $1400 billion real GDP with a recessionary gap.…

A: Given; Equilibrium level of real GDP= $1400 billion Marginal Propensity to Consume; MPC=0.63…

Q: If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60…

Q: Suppose the tax multiplier in an economy is -3. How will total spending (TS) change when taxes (T)…

A: Since tax multiplier is -3, it means that if T decreases by $1, TS increases by $3. So, When T…

Q: suppose the government wishes to illuminate recessionary GAP of 100 billion and the MPC is .75. How…

A: The multiplier shows the change in real GDP as a result of a change in the autonomous expenditure.…

Q: If MPC = .5, a simultaneous increase in both taxes and worthless government spending of $20 will:…

A: The balanced-budget multiplier is equal to 1 in this case . When the government increases spending…

Q: If the MPC in an economy is 0.80, government could shift the aggregate demand curve leftward by $48…

A: The fiscal and monetary policies are used by the governments to control the macroeconomic variables…

Q: Questions number 6 to 10 are based on having an MPC equal to 0.8 and potential output is P800…

A: In Keynesian economics, the change in aggregate expenditure is able to affect the output level(real…

Q: In the country A , autonomous consumption (CA) is 100, marginal propensity to consume (CY) is 0.5,…

A: The equilibrium is established: Y= C+I+G.

Q: Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out…

A: Multiplier can be calculated as follows: Multiplier=11-MPC=11-0.6=2.5

Q: Consider two policies: a tax cut that will last for only one year and a tax cut that is expected to…

A: Tax cut is the reduction of tax rate charged by the government. If the tax cut is for temporary or…

Q: A cut in taxes will have a greater impact on aggregate demand if it is given to: a. people with a…

A: Marginal propensity to consume shows the change in consumption with respect to change in income.

Q: Critically evaluate the impending rise of sales tax planned by the Japanese government and its…

A: The authorized (GDP) gross domestic product sculpture though was more diminutive than the 7.1% drop…

Q: Assuming no crowding-out, investment-accelerator, or multiplier effects, a $100 billion increase in…

A: Multiplier refers to the situation where the number of times the level of income increases due to…

Q: Which of the following accurately describes the phenomenon of crowding out? government…

A: Aggregate demand is composed of consumption spending, investment spending, government purchases and…

Q: government spending multipliers are larger than tax multipliers and politicians can direct…

A: First we have to look at the equation for the Simple-Keynesian-Model. Y=C(Y-T)+I+G Where-Y is the…

Q: the MPS in an economy is 0.25, government could shift the aggregate demand curve leftward by $60…

A: The multiplier value will decide actual level of change expenditure to produce certain effects.

Q: Determine the net impact upon the nation's economy that results from equal increases in government…

A: Change in Y = [{1/ (1-MPC)}* change in G] – [{MPC/ (1-MPC)}]* change in T =…

Q: The government enacts a policy to increase spending by $2 billion. The MPS is 0.25. What would be…

Q: Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal…

A: Initially, due to the tax cut of 50,000,000 the spendings of people rose by the MPC (given as 0.9).…

Q: If the MPS in an economy is 0.43, government could shift the aggregate demand curve rightward by $40…

A: MPS is the proportion of increase in income that goes into saving i.e. MPS = ΔS/ΔY We are given MPS…

Q: Suppose there are both multiplier and crowding out effects but without any accelerator effects. An…

A: Components of aggregate demand in a closed economy include consumption, investment and government…

Q: (Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with…

A: Multiplier = 1 / (1- MPC) When government purchases decreases by $10 billion, For MPC = 0.9 Real GDP…

Q: Marginal propensity to consume = 0.8; In an economy with tax rate = 0.25 and Marginal propensity to…

A: Given: MPC = 0.8 MPI= 0.10 Tax rate= 0.25 Increase in autonomous spending = 250 units.

Q: Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out…

A: The aggregate demand curve shows all the combinations of the quantity of real GDP demanded in the…

Q: Shift the aggregate demand curve on the graph to show the impact of a tax hike. 130 Aggregate Demand…

Q: Consider a closed economy with a government. Consumption is given by C = 1,000 + 0.8Yd Further, t…

A: Aggregate output is the sum of consumption, investment, government spending and net exports in an…

Q: Let’s assume that the economy in the United States is higher than the potential GDP. If the…

A: When the GDP is higher than potential output (AD/AS=LRAS), the higher demand create a inflationary…

Q: The recent economic recession was brought about by the Covid-19 pandemic. The pandemic brought along…

A: The recent economic recession which was brought about by the Covid-19 pandemic has been responsible…

Q: Suppose the MPC is 0.8. What is the tax multiplier in this economy? If the government were to lower…

A: Tax multiplier = - MPC / (1 - MPC) = - 0.8 / (1 - 0.8) = - 0.8 / 0.2 = - 4

Q: Suppose the MPC = 0.8 and the government increases spending by P100 billion, financing this spending…

A: MPC = 0.8 -------- Government spending multiplier = 1 / (1 -MPC) => Government spending…

Q: Assume a contradictory gap of $4 trillion. With MPC equal to 0.75, what would be the recommended…

A: The use of government spending and tax policies to influence economic conditions, especially…

Q: Suppose the government reduces taxes by $20 billion and that there is no crowding-out effect and the…

A: Answer to the question is as follows :

Q: Crowding out occurs when Question 25 options: increased money supply causes private…

A: Crowding out is a situation that arises when the government applied pure expansionary fiscal policy.…

Q: If government purchases increase by $20 billion and aggregate demand shifts rightward by $30 billion…

A: the MPC for this economy is 0.33

Q: Suppose the MPC is 0.85. If government purchases increase by $10 billion and net taxes fall by $10…

A: MPC = 0.85 --------------------- Government spending multiplier = 1 / (1-MPC) => Government…

Q: The federal government implements an expansionary fiscal policy of increased spending and decreased…

A: Fiscal policy delineates the efforts put by the federal government to control and regulate the…

Q: Given the above model for an economy C = 100 + 0.8Yd G = 800 T = 500 I = 200 a) Calculate the level…

A: Hello, Thank you for the question. Since there are many sub-parts in the question, only the first…

Q: Differentiate the multiplier effect and crowding-out effect that explain the causes of the…

A: The phenomenon of multiplier describes a change (increase or decrease) in the expenditure injection…

Q: Explain carefully why the tax multiplier is negative and why it is smaller in absolute value than…

A: There exist an inverse relationship between taxes and the level of output or GDP. This is because a…

Q: If the MPC in an economy is .6, the government could shift the aggregate demand curve to the right…

A: With the increase in government expenditure, Aggregate Demand shifts to the right by initial…

Question

If the MPC in an economy is 0.6, government could shift the aggregate demand curve rightward by $30 billion by

Multiple Choice

decreasing taxes by $20 billion.
increasing government spending by $20 billion.
increasing government spending by $18 billion.
decreasing taxes by $30 billion.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

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

Calculate the government spending multiplier and the tax multiplier if the MPC is 0.6. Show your work
An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4 billion. The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.
Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000
If the MPS in an economy is 0.25, government could shift the aggregate demand curve rightward by $80 billion by Multiple Choice increasing government spending by $20 billion. increasing government spending by $80 billion. decreasing taxes by $20 billion. increasing taxes by $20 billion.
In 1968, mandatory government spending was approximately ________ of GDP and in 2108 mandatory government spending was about ________ of GDP. 10%, 12.5% 5% , 5% 5%, 12.5% 10%, 10%
If the tax multiplier is -5 and taxes are reduced by $200 billion, output falls by $1000 billion. falls by $40 billion. increases by $40 billion. increases by $1000 billion.
Government initally increased spending from 50 million to 100million . Household responded by increasing spending from 20 million to60 million. What is MPC and MPS
Suppose that the government decreases its autonomous spending by $100 billion and also decreases its autonomous taxes by $100 billion. How would this affect the economy? Question 8 options: No effect on the level of GDP GDP may rise or fall depending on the size of the mpc GDP will rise GDP will fall
If the MPC is 0.9, then the tax multiplier is a. -0.1 b. -1.11 c. -9 d. -10
An equal increase in government purchases and taxes will cause an increase in real GDP. no change in real GDP. an increase in the budget surplus. a reduction in cyclically adjusted budget surplus.
If the MPS in an economy is 0.25, government could shift the aggregate demand curve rightward by $64 billion by Multiple Choice decreasing taxes by $16 billion. O increasing taxes by $16 billion. increasing government spending by $16 billion. increasing government spending by $64 billion.
If the MPS in an economy is 0.2. What is the tax multiplier? Group of answer choices a. 4 b. 5 c. -4 d. -5