Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM = -80 T = 400 a. Find the actual level of GDP. b. If full employment comes at Y = 1000, would there be a recessionary gap or an inflationary gap? c. What spending changes will be necessary to eliminate this gap? d. What amount of tax changes will be necessary to eliminate this gap? e. What are some policies action that can be taken.
Q: How much would the government have to change spending to close the gap?
A: There is multiplier effect occur in the economy so there is no need to send the same amount of…
Q: Assume the economy is currently experiencing a 100 billion-dollar recessionary gap. Furthermore,…
A: For finding the change in taxes, tax multiplier needs to be determined. Tax multiplier= MPC/(1-MPC)…
Q: an economy where the various components of expenditure follow these equations: C = 10 + 0.8Yd I =…
A: A) Y= C+I+G+(X-M) Y= 10+0.8Yd+500+100+(300-0.1Y) Y= 10+0.8(Y - T)+500+100+(300-0.1Y) Y= 10+0.8(Y -…
Q: Explain why is it possible that the economy will not self-correct out of a recessionary gap?
A: Self correction is viewed as movements of the short-run aggregate supply curve brought about by…
Q: Which of following statements explains why the consumption of all 'weak-willed' households tends to…
A: Consumption is an important component of aggregate demand (AD). It affects the economic position,…
Q: ow is it possible for the economy to have an inflationary gap? a. GDP is falling at full…
A: Answer to the question is as follows:
Q: An economy is at full employment. Which of the following events can create a recessionary gap? A.An…
A: Recessionary gap : Anything that decreases the net expenditure line, such as a decrease in demand,…
Q: Potential GDP 450 C+I+G+X-IM) E T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In…
A: When there is an excess of total disposable income above the value of available items at a specific…
Q: The value of consumption at the equilibrium le of output and income is? Aggregate spending at full…
A: A recessionary gap corresponds to a positive GDP gap where actual GDP is less than potential, while…
Q: Suppose the United States economy is repre- sented by the following equations: Z = C +…
A: Here, given information is: Z = C + I + G C = 500 + 0.75YD T = 600 I = 300 G = 2000 YD = Y − T
Q: Consider an economy described by the following…
A: Given, Y=C+I+GC=100+0.75(Y-T)I=500-50rG=125T=100 It has also given that at its natural rate, GDP…
Q: Consider an economy described by the following equations: Y = C+I+G C = 100+0.75 (Y-T) I = 500-50r…
A: The national income equation is written as: GDP=C+I+G+X-M C--- consumption I--- investment…
Q: Given the macro economic data below, draw a graph to illustrate if there is arecessionary gap in the…
A: a.)Recessionary gap:Equilibrium GDP can be calculated as follows:
Q: hich of the following will most likely cause movement along the consumption function? a. A change…
A: Definition of Consumption Function : A consumption function shows what is the consumption at…
Q: Ford announces that it will add 2000 salaried jobs to its Canadian workforce this month. The…
A: Average salary 50,000 Canadian Dollars Total employees to be employed = 2000 Total Money = 100000000…
Q: Answer the following questions, which relate to the aggregate expenditures model: Instructions:…
A: Answer: (a). Equilibrium GDP=Ca+Ig+G+XnEquilibrium GDP=110+50+30+-10Equilibrium GDP=$180 Equilibrium…
Q: Chapter 11 shows that increased government purchases, with taxes held constant, can eliminate a…
A: Recessionary Gap: The term recessionary gap refers to the economic situation when the real GDP of…
Q: The government announces a cut in the income tax rate. (a) Explain the multiplier effect by…
A: The government announces a cut in the income tax rate.
Q: TRUE OR FALSE WITH REASON. 1. In a recessionary gap, the Real GDP that the economy is producing is…
A: In a recessionary gap, the Real GDP that the economy is producing is lesser than Natural Real GDP.…
Q: Suppose an economy is experiencing recession. From the list below, select two (2) policy tools that…
A: Recession is an general decline in the economic activities. It occurs when there is a decline in…
Q: : An economy is described by the following equations: Z=C+l+G C=600+0.6(Y-T) I=300 G=700 T=600 ) :…
A:
Q: The image attached, is a screen shot of the question. The question is: If the marginal propensity…
A: Please find the answer below.
Q: Use the graph to answer the following question: Investment Demand Quantity of Investment If the…
A: Fiscal policy, measures utilized by state run administrations to settle the economy, explicitly by…
Q: Households tend to increase their spending during a recession because they realize that more…
A: Recession:- Recession can be defined as a period of economic contraction during which economic trade…
Q: Suppose an economy is characterised by the following: C = 160 + 0.6 (400 - T) | = 150 G = 150 T =…
A: C=160+0.6(400-T)I=150G=150T=100 (i) For equilibrium output…
Q: Consumer spending fell significantly at the start of the pandemic by 13.6%, but increased by 5.6% in…
A: A recession is characterized as a prolonged period of low or negative real GDP (output) growth,…
Q: Discuss characteristics of an economy that helps itself correct from a recessionary gap.
A: Potential GDP is the GDP that an economy can produce, given all its resources are at full employment…
Q: A) What is the value of the marginal propensity to consume? ( Round your answers to one decimal…
A: The completed table is shown below:
Q: r each of the following, please explain each step and show it in the graph! a. Assume an economy is…
A: The full employment level is the level at which all the resources are employed to their best…
Q: AS AD, AD Y, Y=Y¡ Recessionary gap Refer to the diagram shown below. Suppose AS curve is horizontal…
A: Aggregate demand is a sum of consumption spending, investment spending, government purchases and net…
Q: Given the information below, answer the questions that follow. C = $40 + 0.8Y I = $30…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: The following graph depicts a macro equilibrium. Answer the questions based on the information in…
A: Answer d) Multiplier = 4GDP Gap = $400 (From Part c) Additional Investment can be calculated as…
Q: Assume the following model of the expenditure sector: S=C+I+G+Nx TR=100 C=420+(4/5)YD I=160 G=180…
A: In the expenditure model, Y = C + I + G + NX , since the values are given: Y= 420 + (4/5)[Y –(1/6)Y…
Q: Which of these is not true about aggregate demand? a. It includes consumption, investments,…
A: Which of these is not true about aggregate demand? The answer is - b. It is the amount of total…
Q: he U.S. economy is initially in short-run macro-equilibrium. Assume that China falls into a deep…
A: A recession is a macroeconomic concept that denotes a substantial drop in overall economic activity…
Q: Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts? a.…
A: Permanent tax(T) cuts lead to the permanent reduction in income(Y) and affects both the…
Q: The country is experiencing a serious rise in inflation which the government wants to control…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Macroeconomics: Assuming marginal propensity to consume is 0.5. If there is a shock to the economy…
A: National income indicates the level of consumption, investment, and expenditure in the economy. Any…
Q: With reference to an Injections and Withdrawals diagram. If this diagram is illustrating a…
A: A recessionary or contractionary gap exists when a country's real gross domestic product (GDP) is…
Q: The country is experiencing a serious rise in inflation which the government wants to control…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Consider an economy described by the following equations: Y= C+I+ G C = 100 + 0.75(Y– T) I= 500 –…
A:
Q: The following equations describe an economy C = 750 + 0.75Yd | = 350 G = 700 X = 450 IM = 0.1Y T =…
A: Economy refers to managing available resources.
Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM = -80 T = 400 a. Find the actual level of
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- Which of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession? a. A cut in the marginal tax rate increases the incentives to find a job and work longer hours. b. Consumers will save a portion of a tax cut. c. The government may use the increase in expenditures on projects with little value, particularly, if it wishes to respond quickly. d. There is no evidence that tax cuts have been followed by increases in economic growth.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 c) GDP C I 11200 8000 2200 12000 8500 2400 G 800 880 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. e) NX 200 220 b) What is the initial effect (in billion dollars) of the tax cut on Country B's aggregate demand? (The "initial effect" here refers to the effect on AD after only the first round of increased spending.) What is the total effect of the tax cut on aggregate demand? Explain why it is different from the initial effect. d) How does the total effect of this $24 billion tax cut compare to the total effect of a $24 billion increase in…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
- Consider the table on the right, which shows business investment in inventories for each quarter from the first quarter of 2007 to the first quarter of 2012, measured in millions of 2007 dollars. Provide a macroeconomic explanation for this pattern. (Hint: When did the recession during this period begin and end?) The negative growth of inventories indicates a period of OA. inflation since inventories needed to be reduced in the face of increasing storage cost OB. recession because demand was met by drawing down past inventories and production did not increase. OC. recovery since inventories needed to be used to meet demand. OD. recession because inventories increased due to lack of demand Year 2007 2008 2009 2010 2011 2012 2013 Quarter Q1 308889 Q2 Q3 Q4 R288828 Q1 Q2 Q3 Q4 Q1 228892889 Q2 Q3 Q4 Q1 Q2 Inventory Investment (millions of 2007 dollars) $3360 - 2822 15,570 19,644 6061 9512 11,856 4699 -2364 7779 -4807 - 4807 2663 2508 4841 -6805 8965 12,153 6462 2179 2061 7298 14,091 3875…What is the eventual effect on real GDP if the government increases its purchases of goods and services by $75,000? Assume the marginal propensity to consume (MPC) is 0.75. $ What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $75,000? Assume the MPC has not changed. $ An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in an identical eventual effect on real GDP. no change to real GDP. a larger eventual effect on real GDP. a smaller eventual effect on real GDP.Answer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?
- a). 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? b). 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?Suppose an economy had aggregate demand components with the following relationships: Consumption spending, C=140+.60*(DY) Investment spending,I=25+.15*Y Government Spending, G= 0 Net Export Spending,X=0 Tax collections, Tx=0 a. What is the equilibrium income for this economy? b. If the government decided to increase G spending by 6, what would be the new equilibrium income for this economy? c. If instead the government decided to reduce Tx (taxes) by 10, what would be the new equilibrium income for the economy? d. If instead the government decided to increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium for this economy?The aggregate demand function: yad =C+1+G₁ = 500+ 0.75Y is plotted on the graph to the right. The graph also shows the 45° line where aggregate output Y equals aggregate demand yad for all points. What happens to aggregate output if government spending rises by 100? The equilibrium level of output rises by $ billion. (Round your response to the nearest billion.) Consumption Expenditure, C ($ billions) 3000- 2800- 2600- 2400- 2200- 2000- 1800- 1600- 1400- 1200- 1000- 800- 600- 400- 200- 0- 0 yad =C+I+G₁ = 500 +0.75Y Y = yad 45° 400 800 1200 1600 2000 2400 2800 Disposable Income ($ billions)
- Macmillan Learning What is the eventual effect on real GDP if the government increases its purchases of goods and services by $60,000? Assume the marginal propensity to consume (MPC) is 0.75. What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $60,000? Assume the MPC has not changed. An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in O no change to real GDP. O a smaller eventual effect on real GDP. a larger eventual effect on real GDP. O an identical eventual effect on real GDP.Question 8 Real GDP in the economy is $7,900 Billion and the Marginal Propensity to Consume is 0.56. What will Real GDP in the economy be, in $ Billions, after a $10 Billion increase in Government Spending? (Round your FINAL answer to the nearest whole number/integer.) (BE VERY CAREFUL NOT TO ROUND "MIDDLE" CALCULATIONS. ONLY ROUND THE FINAL ANSWER.) (Do not enter a dollar sign, $. or the word "Billion", just the number.)The image attached, is a screen shot of the question. The question is: If the marginal propensity to consume was 0.8, low large would each of the following need to be in order to restore full-employment equilibrium? A. A tax increase ________billion B. A government spending cut $_________billion C. A cut in income transfers $________billion. I need to know how to figure this out. Again the screen shot of the question with the graph it attached.