Given that the full employment output is $2,500 and the equilibrium real GDP is $2,800, and the MPS (=Marginal Propensity to Save) is 0.25, which of the following taxation changes would most likely bring the economy to a full employment level of real GDP? Group of answer choices $75 increase in taxes $100 decrease in taxes $75 decrease in taxes $100 increase in taxes

In a recession, needs-tested spending ________ and induced taxes ________. increases; increase decreases; increase increases; decrease decreases; decrease increase; do not change   Discretionary fiscal policy is defined as fiscal policy initiated by an act of Congress. left to the discretion of military authorities. with multiplier effects. initiated by a Presidential proclamation. triggered by the state of the economy.   If government expenditure on goods and services increase by $100 billion, then aggregate demand increases by $100 billion. decreases by more than $100 billion. increases by more than $100 billion. increases by less than $100 billion. remains unchanged.   The magnitude of the tax multiplier is ________ the magnitude of the government expenditure multiplier. smaller than greater than exactly one half the inverse of equal to   Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. To increase…

Suppose that real GDP is currently $19.3 trillion, potential GDP is $23.0 trillion, the government purchases multiplier is 1.6, and the tax multiplier is -1.6. Holding other factors (such as prices and interest rates) constant, how will taxes (T) need to change to bring the economy to equilibrium at potential GDP? Provide your answer in dollars measured in trillions rounded to two decimal places. Use a negative sign for negative changes. Do not include any symbols, such as "S," "," "%," or "," in your answer. Your Answer: Answer

One timing problem in using fiscal policy to counter a recession is the "legislative lag" that occurs between the   start of the recession and the time it takes to recognize that the recession has started.   start of a predicted recession and the actual start of the recession.   time fiscal action is taken and the time that the action has its effect on the economy   time the need for the fiscal action is recognized and the time that the action is taken.

To enact Contractionary Fiscal Policy, the federal government must be running a budget ___________.

Suppose that the economy is experiencing a recession with an estimated recessionary gap of $15 billion. Congress is considering the use of fiscal policy to ease the recession, but due to current political sentiments, it has determined that the maximum spending increase the government is willing to support is $2 billion. It wants to make up the remainder of the recessionary gap using tax cuts. If a spending increase of $2 billion is approved and the MPC is 0.8, by how much will taxes need to be reduced to close the remainder of the recessionary gap? Instructions: Round your answer to 2 decimal places. 5 billion

Which of the following statements regarding government fiscal policy are correct? Assume ceteris paribus. a) The government's debt to GDP ratio will be increasing if there is a primary budget deficit. + b) Higher spending on interest payments increases government debt but does not increase the primary deficit. c) In a recession, a government using fiscal policy to stabilize aggregate demand will design its policy to override the automatic stabilizers. ◆ +

Suppose the economy had been producing at potential output but is now experiencing a recession. Which of the following are discretionary fiscal policies that could bring the economy closer to potential output? Check all that apply. a)Additional spending on national park facilities   b)A tax hike   c)A reduction in government purchases   d)A tax cut

The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes    .   The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right.   The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new consumption line you just plotted to calculate the new total expenditure at two levels of real GDP and fill in the following table. GDP level Total Expenditure (Billions of dollars) (Billions of dollars) 10   90     Use the green points (triangle symbols) to draw the new total…

3. The Government of Wonderland decides to adopt an expansionary fiscal policy increasing its expenditure (G) by $500 billion. They know that the value of MPC is 0.6. By how much should the economy be expected to expand? Answer Here: Gxmpc=$100X0.6 200 Will Crowding Out affect the final outcome of this move? Explain your answer Answer Here: