Suppose the MPC is 0.85. If government purchases increase by $10 billion and net taxes fall by $10 billion, equilibrium output will a)increase by $10 billion b)increase by $66.7 billion c)increase by $123.3 billion
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Suppose the MPC is 0.85. If government purchases increase by $10 billion and net taxes fall by $10 billion, equilibrium output will
a)increase by $10 billion
b)increase by $66.7 billion
c)increase by $123.3 billion
d)increase by $20 billion
e)fall by $10 billion
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- Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.5. how much must the government cut its spending? b) what would be the effect of the government increasing taxes by this amount?N6 Given the MPC = 0.60 and the potential output is $700 billion, calculate the government expenditure multiplierGiven a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to increase by $1200 billion? True/False
- 1.Suppose MPC = 0.75, if government increases taxes by $2,000, how much will the household consumption increase or decrease initially?The marginal propensity to consume out of permanent income equals 0.9 and the marginal propensity to consume out of transitory income equals 0.1. Suppose that there is an emergency increase in government spending of $200 billion to repair infrastructure. The spending takes place within a year. The spending increase is financed by a one-time increase in taxes. Prior to the increase in government spending, permanent income equals $9,600 billion and transitory income equals zero. (a) Compute the amounts of consumption expenditures and private saving prior to the tax increase. (b) Compute the amount of changes in consumption expenditures and private saving, given that the tax increase lasts for only one year. (c) Compute the initial change in aggregate demand that results from this combination of increases in government spending and taxes.What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary? Assume that the MPC is 0.9.
- Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making expenditures of $100 billion. How will this affect GDP if MPC=0.8?In an economy where the MPC is 0.7, the proportional tax rate is 0.25 and the marginal propensity to import is 0.2, the multiplier will be:Select one:a.0.675b.1.48c.2.35d.2.1Assume an MPC of 0.9. The change in total spending for the economy as a result of a $100 billion new government spending injection would be: A) $90 billion B) $80 billion C) $900 billion D) $800 billion
- 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?An 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 byIf the MPC is .75, the government spending multiplier is
