Answered: If the MPC in an economy is 0.80,…

If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80 billion by cutting taxes by

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: Italy is a relatively rich country with per-capita GDP of $28,000. India is a relatively poor with…

A: The rule of 70 is a means of estimating the number of years it takes for an investment or money to…

Q: If the MPC is 0.80 and the government increases transfer payments by $45 billion, then the initial…

A: When government increases transfer payments it results in more disposable income to spend. . A rise…

Q: real GDP = (Change in Taxes) X Change in equilibrium (Tax Multiplier) Change in equilibrium real GDP…

A: Initial change in the tax or investment causes multiple change in final income. The value of…

Q: Suppose MPC = 0.75. If the government increases spending by $100 billion, Workers get $100 billion…

A: MPC stands for marginal propensity to consume that is the percentage of extra addition to the income…

Q: Suppose that the economy is experiencing a recession with an estimated recessionary gap of $30…

A: Recessionary Gap or the contractionary gap is a situation in an economy or nation when the country’s…

Q: Given that the full employment output is $2,500 and the equilibrium real GDP is $2,800, and the MPS…

A: Tax multiplier: - it is a fraction that shows the magnitude of the change in national income due to…

Q: Assume that the MPC is 0.9 and investment falls by $30 billion. What is the change in real GDP?

A: mpc is 0.9. Multiplier(M)= 1/1-mpc

Q: Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government aims to increase…

A: Gross domestic product (GDP) is the standard measure of the value added created through the…

Q: If the expenditure multiplier is 2.5 and the government spending increases by $4 billion, what would…

A: Given: Expenditure multiplier = 2.5 Government spending = $4 billion

Q: If C=20 I= 30 G=10 NX=-15 MPC=2/3 T= 30% T=0.3Y What is the equilibrium level of output Y for which…

A: The equilibrium real output and price are determined by the interaction of aggregate demand and…

Q: If the MPC In an economy Is 0.80, government could close a recessionary expenditure gap of $100…

A: Meaning of Money Multiplier: As from the word, the money multiplier refers to the situation under…

Q: U 1 2 point Suppose a country's MPC is 0.75. If the government increases taxes, causing disposable…

A: Marginal propensity to consume shows how consumption changes as income changes.

Q: If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60…

Q: The marginal propensity to save is 0.20. Equilibrium GDP will decrease by $75 billion if the…

A: The objective of the question is to find out by how much the aggregate expenditures schedule…

Q: If we assume marginal propensity to consume (b) is 80 % and marginal tax rate (t)is 15 %, and…

A: The effect of change in government spending on the national income is the government multiplier.

Q: Suppose that autonomous consumption is 1,000, government purchases are 2,000, planned investment…

A: GDP refers to the sum of consumption, investment, government spending and net exports in an open…

Q: Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession.…

A: Recession is a period where real GDP is decreasing. This can be rectified by increasing aggregate…

Q: Given the MPC = 0.60 and the potential output is $700 billion, calculate the government expenditure…

A: MPC = 0.60 Potential Output = 700 billion

Q: If C=20 I= 30 G=10 NX=-15 МРC-2/3 T= 30% T=0.3Y What is the equilibrium level of output Y for which…

A: To get the equilibrium level of output: National income = aggregate expenditure. Given information:…

Q: The government estimates that the MPC is 0.80. How much should the government increase spending to…

A: The Marginal propensity to consume is given as 0.80. The anticipated shift in aggregate demand is…

Q: Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making…

A: If MPC=0.8 then MPS=1-MPC MPS=1-0.8 MPS=0.2

Q: A recessionary gap is how much GDP needs to increase from the current GDP to achieve full…

A: Recessionary gap: In general, a recessionary deficit is a disparity between real and future demand…

Q: n a closed economy such that: C = 100 + 0.8 (Y – T) Md = 0.25 Y - 50 R I = 700 - 50 R…

A: The basis of the IS-LM model is an analysis of the money market and an analysis of the goods market,…

Q: If there is a recessionary gap of $200 Billion and the MPC is .9, how much would government spending…

A: Hi. Since there are two questions, we will solve only the first one. 9. Recessionary gap is given by…

Q: Suppose that the level of GDP increased by $100 billion in a private closed economy where the…

A: Answer: Let us first find the expenditure multiplier. The expenditure multiplier increases the level…

Q: What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the…

A: (1) Before-tax: Before-tax, GDP and Disposable income (DI) are the same. As we can see, every 100…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…

A: The marginal propensity to consumer (MPC) refers to the change in the change in the consumption…

Q: Suppose that the MPC is 0.8 and that $18 trillion of real GDP is currently being demanded. The…

A: GDP: It means the monetray value of finished goods and services that are produced in the country.

Q: If the MPC is .75, the government spending multiplier is

A: The government spending multiplier is the amount by which a change in government spending affects…

Q: Suppose Kittyville's full-employment GDP is $600 billion, and the current equilibrium GDP is $400…

A: Full employment GDP is the potential output that an economy will produce with efficient utilization…

Q: suppose the government wishes to eliminate a recessionary GAP of 100 billion and the MPC is .75.…

A: Recessionary gap is when the country's GDP is lower than its GDP at full employment level.…

Q: How much government spending needs to be increased by to maintain full employment in the economy If…

A: *Answer:

Q: In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the…

A: It is given that the autonomous consumption in the Keynesian land is $50 million. This means that…

Q: In a depressed economy with an MPC of 0.20, what effect will a $200 increase in government spending…

A: Consumption is the sum of autonomous consumption and consumption dependent on income. Disposable…

Q: If the autonomous expenditure by the government increases by 7000 and the MPC is 0.2 find the level…

Q: Given MPC (marginal propensity to consume) = 0.75, if the government implements an expansionary…

A: MPC = 0.75 Tax multiplier = (-MPC/1-MPC) Tax multiplier= (-0.75/1-0.75)Tax multiplier=…

Question

If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80 billion by cutting taxes by

$100 billion.
$80 billion.
$20 billion.
$64 billion.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

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

Please answer this!!!
Assume that an economy with an MPC of 0.8 is experiencing a recessionary gap of $25 billion. The government has decided to intervene in the economy by using fiscal policy to fight the recession. By how much would government spending have to change to bring about a total change in aggregate demand of $25 billion? Show your work.
If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $100 billion by cutting taxes by Multiple Choice • $125 billion. • $100 billion. • $80 billion. • $20 billion.
Suppose the aggregate expenditure (AE) schedule in an economy is given by the equation AE = 1,000 + 0.8Y, where Y represents the real GDP. The government plans to implement an expansionary fiscal policy by increasing government spending by $200 billion. Calculate the new equilibrium level of real GDP (Y) if the marginal propensity to consume (MPC) is 0.75.
If the marginal propensity to consume (MPC) is 0.8, the government purchases multiplier will be This means that a $1 increase in government purchases will lead to a $ increase in real GDP.
Answer both I will upvote
Suppose that the economy is experiencing a recession with an estimated recessionary gap of $30 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 $6 billion. It wants to make up the remainder of the recessionary gap using tax cuts. If a spending increase of $6 billion is approved and the MPC is 0.75, 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. $____billion
The marginal propensity to save is 0.20. Equilibrium GDP will decrease by $75 billion if the aggregate expenditures schedule decreases by. make sure the answer is accurate. Group of answer choices $15 billion. $150 billion. $20 billion. $5 billion.
If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $160 billion by cutting taxes by Multiple Choice $200 billion. $160 billion. $80 billion. $128 billion,
Q)If the MPC .8 and we have a 200B GDP Gap, how much will initial expenditures need to increase to bring the economy to full employment GDP.
If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80 billion by cutting taxes by S100 billion. S80 billion. S20 billion. S64 billion.
If the MPC is 0.8 and investment increases by $5 billion, the equilibrium GDP will Multiple Choice increase by $25 billion. increase by $4.0 billion. decrease by $6.25 billion. increase by $6.25 billion.