Given that the marginal propensity to consume in a fully employed closed economy is 0.75, an increase in government expenditure of $1,000 million will increase the national income by: a. $0 b. $750 c. $4,000 d. $7,500 e. $8,000

Given that the marginal propensity to consume in a fully employed closed economy is 0.75, an increase in government expenditure of $1,000 million will increase the national income by: a. $0 b. $750 c. $4,000 d. $7,500 e. $8,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: (а) You are given the following information. Consumption (C) = 400 + 0.8Yd Government Expenditure…

A: Equilibrium takes place where AE = Y

Q: Assume the government cuts spending by Si billion and the marginal propensity to save was 0.1. a.…

A: Gross domestic product (GDP) is the total monetary value, or market value, of finished products and…

Q: Find the impact of these changes on National Income. Explain the leakages of multiplier

A: The amount of output generated in the economy in a period is said to be national income. It also…

Q: Suppose the cor increase in gover

A: Initial consumption:The consumption function is given as C = 100 + 0.9(Y-T).We are given that…

Q: An economy has a MPC of 0.80. Suppose only that taxes are increased by $300 billion. Calculate the…

A: MPC is the marginal propensity to consume which is the proportion of income spent on consumption.

Q: If mps is .3 and marginal propensity to import is .1 and govt. Increases its expenditures by 10…

A: Given MPS = 0.3 MPI (marginal propensity to import) = 0.1 Increase in expenditure = 10 billion

Q: In the national-income model Y = C+I+ Go C = a + B(1- t) Y I = I, + 8Y assume that a > 0 and B, 6, t…

Q: Given that the marginal propensity to cinsume is 0.8 and that the initial change in investment…

A: National income indicates the level of consumption, investment, and expenditure in the economy. Any…

Q: In the income multiplier is equal to 4, then a $25 initial increase in government spending leads to…

A: The public authority spending multiplier impact is clear when a steady increase in spending prompts…

Q: Guideline Agg. Demand Consumption Consumption 196 56 National Income 490 1. The Marginal Propensity…

A: Given : ( from the graph ) Autonomous consumption = C' = 56 Aggregate demand at zero income = 196…

Q: Assume a closed economy with a GDP (Y) of 6,000. Consumption (C) is given by the equation C = 600+…

A: Aggregate Demand: Aggregate demand in an economy is the sum of private consumption expenditure (C),…

Q: Which methods do economists employ in order to calculate the market value of all final goods and…

A: Economists are professionals who study and analyze economic systems, behavior, and phenomena. They…

Q: 1. Suppose a closed economy has national income of $50 million, Investment of $2 million, Inflation…

A: Total tax rate= (Net tax rate+Rate of inflation)=(15+5)%=20% Total tax revenue=T= $(50*0.2) mil=$10…

Q: Equilibrium condition: Y=C+I+G+NX a. Solve for equilibrium real income. b. If autonomous real…

A: The national income in the open economy is constituted of the consumption function, investment,…

Q: If disposable income is 85 per cent of national income, the marginal propensity to consume (out of…

A: The measure which depicts the degree to which a consumer would in turn be spending or saving with…

Q: 6. Study Questions and Problems #6 Consider an economy that is operating at the full-employment…

A: This can be explained as a concept that shows the total demand for the products and services in a…

Q: A recessionary expenditure gap

A: There are two types of gap, depicts different situation: Inflationary gap and…

Q: Real GDP 0 10 40 70 100 130 160 Consumption (after taxes) $-20 20 40 60 80 100 Gres investment $10…

A: As evidenced by the years following World War II, Keynesianism has advanced in its capacity to…

Q: Is a competitive market “efficient”? Define efficiency and explain.

A: A competitive market is a market in which there exist a large number of buyers and sellers, the…

Q: What is the NPV?

A: Economics studies the production, distribution and allocation of resources. Engineering economics…

Q: Disposable income ________ when ________. a. decreases; taxes increase b. decreases; transfer…

A: DISPOSABLE INCOME IS A NET INCOME , IT IS THE AMOUNT LEFT OVER AFTER TAX. IT IS ALSO KNOWNS AS…

Q: e. At the new equilibrium there is a budget deficit os $ 4 Round your answer to 2 decimal places.

A: Aggregate expenditure is the sum of Consumption, Investment, government spending and net export. At…

Q: Potential 450 GDP C+1+G+(X-IM) F E T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In…

A: Answer to the question is as follows :

Q: What is the definition of National Savings? Check all that apply. Due July 17th by 10pm.

A: Since you have asked multiple questions, we will solve the first question for you. If you want the…

Q: 3. (1 pt) Use the consumption function diagram to illustrate what happens when there is a tax cut.…

Q: 2. Suppose the consumption function of country A is C-1000+ 0.8Y, ( is the disposable income).…

A: Equilibrium condition: Y= C+I+G

Q: Y C 3. The following table shows income (Y) and consumption (C): Calculate: 100 105 L 125 110 II.…

A: 4. I. Income approach:GNP = GDP + Net factor income from abroad GDP = Total Rent + Wages + Profits +…

Q: GDP Consumption $440 $450 490 490 540 530 590 570 640 610 Refer to the accompanying consumption…

A: Given: Gross investment = $34 billion The Lump sum tax = $30 billion To Find: The after-tax…

Q: 7. A government is utilizing fiscal policy by increasing government spending by 2 billion. If this…

A: Given information: The government spending is increasing by 2 billion => Change in government…

Q: Suppose autonomous consumption in an economy is $3 trillion, the MPC is 0.8, government spending is…

A: GDP is the sum of consumption, investment, government spending and net export. This means, GDP = C…

Q: Assume a closed economy with a GDP (Y) of 6,000. Consumption (C) is given by the equation C = 600+…

A: Aggregate expenditure: aggregate expenditure is the sum of consumption expenditure, investment…

Q: Assume that a three sector economy in country W the amount of autonomous consumption is RM 300…

A: National income is given by the aggregate of consumption, investment, government expenditure.

Q: Which one of the following pairs of points coincide O The Break-even point and the national income…

A: The equilibrium point is the stable state where all the forces are equal, balanced and in stable…

Q: Find the NDP from given data. GNP at MP $ 97503, net rector income from abroad $-201, net indirect…

A: GNP at MP = $97503, Net rector income from abroad = -$201, Net indirect of fixed capital = $10576,…

Q: Which of the following is more likely to be effective in increasing the growth rate of real GDP?…

A: Aggregate demand is the sum of consumption, investment, government spending and net export. The…

Q: Question 2 An inflationary gap is the amount by which: O Equilibrium GDP falls short of the…

A: Inflationary Gap:- The favorable deviation among the actual Gross Domestic Product and potential…

Q: Given this diagram, if Investment spending were to be reduced to 10, what would be the resulting…

A: Goods market equilibrium is achieved at the point where the aggregate expenditure is equal to…

Q: A food manufacturer is trying to maximize profit by selling wheat-based cereal (C) and wheat…

A: Cereal C = 31wc - 1.5wc2 Bread. B = 66wb - 2wb2 Constraint. wc + wb = 9055

Q: Suppose net taxes are $50 billion. Government spending is $125 billion. Investment is $50 billion…

A: GDP is the gross domestic product. GDP is defined as the market value of all the final goods and…

Q: Govt purchases increase by $87b and the MPC = .89. By how much will RGDP eventually increase? (round…

A: Increase in Govt. purchases or spending = $87 billion MPC = 0.89

Q: , which expenditure level will result in a recessionary ga

A: When the actual production in an economy is less than its potential production it is called as…

Q: Question 5/ 25 If government spending decreased by $500. Given that c= 100+0.75y and the initial…

A: here we calculate new equilibrium income by using the given information and choose the correct…

Q: 1. The Marginal Propensity to Consume (MPC) is: A. 0.50 B. 0.60 C. 0.70 D. 0.75 2. The Multiplier…

A: Given information Item Amount Breakeven level of income 450 APS at income level…

Q: What is the value of the sensitivity money demand to the level of income? O a. 25 O b. 0.50 O c. 50…

A: C = 2000+ 0.65(Y-T) I= 900- 50i G= 400 T= 1500 M= 1000 P= 2 L= 0.50Y -25i

Question

Question:
Given that the marginal propensity to consume in a fully employed closed economy is 0.75, an increase in government expenditure of $1,000 million will increase the national income by:
a. $0
b. $750
c. $4,000
d. $7,500
e. $8,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Answer the questions on the basis of the information given in the following diagram: Guideline Consumption 4 Consumption function 360 54 360 National income 1. The Marginal Propensity to Consume (MPC) equals: А. 0.70 В. 0.75 C. 0.80 D. 0.85
- If an economy is in equilibrium when national income is $1000, and the level of autonomous expenditure is $600, what is the value of the marginal propensity to withdraw? - Imagine an economy where autonomous expenditure is $50, and the equilibrium level of national income is $125. How much would autonomous expenditure have to increase by to achieve full employment output of $150 ?
Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 05. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. A) calculate the national income equilibrium.
10:35 PM A O 60 Aggregate Expenditures Schedule 50 Tools 40 C+1 Equilibrium 30 20 10 10 20 30 40 50 Real GDP (billions of dollars) Instructions: In part b, enter your answer as a whole number. In part c, round your answer to 1 decimal place. b. What is the equilibrium GDP for this country? billion c. What is the marginal propensity to consume for this country? Aggregate expenditures (billions of dollars)
Other things remain unchanged, a country's Aggregate Demand is made up of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $200 billion. To obtain full employment under these conditions, the government should: Select one: a.increasing corporate income taxes to discourage private domestic investment. b.reduce tax rates and/or increase government spending. c.increasing interest rate on government bonds to encourage personal saving.
Need answer quickly
1. If equilibrium national income is higher than the potential income at full- employment, there will be in the economy a.deflationary gap b.recessionary gap c.inflationary gap d. inequality gap
A 20. In a closed economy without investment and government spending, C = 1000 +.5YD, and taxes T=50, what would be the equilibrium national income? (a 1000. 1, 500 +50 b. 10000. 6,00o + 50 c. 4600. 3,300 d. 5000. 3.500 + 50 50
6.If the MPS is 0.60, MPC a.is 1.60. b.is 0.30 c.is 0.40 d.cannot be determined
2
Suppose in the economy of Richlandia the GDP in 2021 was $ 150 billion. Also, assume that gross investments was $ 40 billion, personal consumption expenditure was $ 80 billion and net exports was -20 billion. What was the value of government spending in Richlandia in 2021? OA.$0 OB. $ 10 billion OC$ 50 billion OD.$ 30 billion
2. In an open economy, given the Consumption = 50+ 0.6Y Investment = 120 Government expenditure = 70 Tax = 20 Net export = -10 Calculate the national income equilibrium using aggregate expenditure approach. a.545 b.363.33 c.417.47 d. 230