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The tax rate is 0.4. The marginal propensity to import is 0.5 .
When real GDP increases from $20,000 to $20,198, consumption increases from $18,000 to $18,050. What is the marginal propensity to consume?
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- You Suppose the government increases education spending by $20 billion. If the marginal propensity to consume is 0.75, how much will total spending increase? Instructions: Round your response to one decimal place. $ billionThe marginal propensity to consume (MPC) is 0.75. The multiplier is 4. (Round your answer to one decimal place.) Suppose that government spending changes by S- 400. The change in real GDP will be S . (Round your answer to the nearest dollar.)1.4. The deflationary gap in an economy is calculated to be $700 billion. The marginal propensity to save (MPS) is 0.1 The marginal propensity to import is (MPM) 0.15 The marginal rate of taxation is (MPT) 0.1. By how much would the government need change its spending on goods and services to eliminate the deflationary gap? 1.5. How does CHANGE in PRICES effect your lives? 1.6. Explain why INFLATION usually accelerates during wartime? Macroeconomics and the goals of Macroeconomic policy
- Suppose the government increases expenditures by $50 billion and the marginal propensity to consume is 0.90. By how much will equilibrium GDP change? The change in equilibrium GDP is: $ billion. (Round your solution to one decimal place.)Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.8 A. Government purchases rise by $40 billion B. Taxes fall by $40 billion.calculate the expenditure multiplier, if the marginal propensity to consume = .80, the tax rate = .25 and the marginal propensity to import = .1
- Why will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a) Because people viewed the tax increase as permanent. b) Because people chose to increase their saving. c) Because people viewed the tax increase as temporary. d) consumption expenditures are not related to the level of taxation.Assume that the short run equilibrium GDP is $4,000 billion and the potential GDP is $5,000 billion. The marginal propensity to consume is 0.8. [a] Would you classify this society more inclined to consume or save? Explain . [b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.The table shows real GDP, Y, the components of planned expenditure, and aggregate planned expenditure (in millions of dollars) in an economy in which taxes are constant. Calculate the marginal propensity to consume and the marginal propensity to import. What is equilibrium expenditure? >>> Answer to 1 decimal place. The marginal propensity to consume is Planned expenditure Y C G X M AE 0 2.0 1.75 1.0 1.25 0.0 6.0 2 Q 1.75 1.0 1.25 0.4 6.8 4 4.4 1.75 1.0 1.25 0.8 7.6 6 5.6 1.75 1.0 1.25 1.2 8.4 8 6.8 1.75 1.0 1.25 1.6 9.2 10 8.0 1.75 1.0 1.25 U 10.0 12 9.2 1.75 1.0 1.25 2.4 V
- In 2009, the US Federal government cut taxes by approximately $300 billion, increased government spending by approximately $300 billion, and increased transfer payments by approximately $200 billion. Answer the following questions, assuming the marginal propensity to consume was 0.75. What was the maximum change in GDP from the government spending? Show your work.The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It, therefore,…The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It therefore…