a) About Country A, what is your estimate of the country's marginal propensity to consume(MPC) based on the following information on its GDP (Y) and the components thereof(in billion dollars) for two past years? Show calculation.Year 1Year 2c)GDPCI112008000220012000 8500 2400G800880The next few parts are about Country B, whose government plans to cut taxes by $24 billionas a measure to fight the current recession. The marginal propensity to consume (MPC) inCountry B is known to be 34. There will be no crowding-out effect.e)NX200220b) What is the initial effect (in billion dollars) of the tax cut on Country B's aggregatedemand? (The "initial effect" here refers to the effect on AD after only the first round ofincreased spending.)What is the total effect of the tax cut on aggregate demand? Explain why it is differentfrom the initial effect.d) How does the total effect of this $24 billion tax cut compare to the total effect of a $24billion increase in government purchases? Explain.Based on your answer to (d), can you think of a way by which the government canincrease aggregate demand without increasing the budget deficit?

a) About Country A, what is your estimate of the country's marginal propensity to consume (MPC) based on the following information on its GDP (Y) and the components thereof (in billion dollars) for two past years? Show calculation. Year 1 Year 2 GDP 11200 12000 C 8000 8500 I 2200 2400 G 800 880 NX 200 220 The next few parts are about Country B, whose government plans to cut taxes by $24 billion as a measure to fight the current recession. The marginal propensity to consume (MPC) in Country B is known to be 34. There will be no crowding-out effect.

a) About Country A, what is your estimate of the country's marginal propensity to consume (MPC) based on the following information on its GDP (Y) and the components thereof (in billion dollars) for two past years? Show calculation. Year 1 Year 2 GDP 11200 12000 C 8000 8500 I 2200 2400 G 800 880 NX 200 220 The next few parts are about Country B, whose government plans to cut taxes by $24 billion as a measure to fight the current recession. The marginal propensity to consume (MPC) in Country B is known to be 34. There will be no crowding-out effect.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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