An economy is operating with an output that is $600 billion dollars above its natural rate of $2400 billion dollars and fiscal policymakers want to close the inflationary gap. The central bank agrees to hold the interest rate constant so there is no crowding out. The marginal propensity to consume is 3/4. In which direction and by how much would the government spending need to change to close the gap

Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. If the current actual Real GDP is at $300 million,. government spending by would bring the economy to full employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $ 54,054,054.05 d) increasing: $54,054,054.05

An economy has no imports and no income taxes. An increase in autonomous expenditure of $5 trillion increases equilibrium expenditure by $50 trillion. Calculate the multiplier and the marginal propensity to consume. What happens to the multiplier if an income tax is introduced? >>> Answer to 2 decimal places. The multiplier is

Which of the following is the most likely effect if the government was to increase spending? Responses an increase in bonds an increase in bonds a deflationary gap a deflationary gap a decrease in interest rate a decrease in interest rate a decrease in inflation rate

There is an inflationary gap of $200 billion in the economy. The MPC is 90%. What is the MPS [Select] and the Government Spending Multiplier [Select] the Government need to [Select] much [Select] change taxes, would they [Select] the Tax multiplier [Select] [Select] ? Would spending? By how ? If the Government decided to taxes? What is and by how much

The federal government implements an expansionary fiscal policy of increased spending and decreased taxes. Policy advisors predict output will increase 4% but are surprised when only 3% growth occurs. What might account for the fact that GDP increased by less than the multiplier predicted? a. Policy advisors' calculation of MPS was too high b. The aggregate supply curve was perfectly elastic c. Foreign purchases of domestic goods was greater than expected due to a devalued currency d. Consumption increases more than expected because of the decrease in taxes e. Investment decreased due to rising interest rates

In the above table and figure, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can conduct a balanced budget operation by spending $ trillion.     1)  1   2)  2   3)  4   4)  8

The government is considering raising the tax rate on labor income. Explain the supply-side effects of such an action and use appropriate graphs to show the directions of change, not exact magnitudes. What will happen to: The supply of labor and why? The demand for labor and why? Equilibrium employment and why? The equilibrium before-tax wage rate and why? The equilibrium after-tax wage rate and why? Potential GDP? Explain your response with specifics and provide examples.

A country is in the midst of a recession with a real GDP estimated to be $1.8 million below potential GDP. The governement's policy analyss believe the current value of the marginal propensity to consume (MPC) is 0.90.  (Please answer all parts) a. If the government wants real GDP to equal potential GDP, by how much should it increase governement spending? Alternatively, by how much should it reduce taxes? b. Suppose that during the recession people have become less confident and decide they will spend only 50% of any additional income. In this case, if the governement increases spending by the amount calculated in part A, will real GDP end up less than , greater than or equal to potential GDP? by how much? c. With the same decrese in consumer spending as described in part B, if the governement decreases taxes by the amount calculated in part A, will real GDP end up less than, greater than or equal topotential GDP? by how much? d. Why is it difficult for the governement to predict…