Suppose the economy is in equilibrium at point B which is below the full-employment output of point D. If the government implements fiscal policy targeted at moving real GDP back to point D, but crowding out significantly reduces the effectiveness of the fiscal policy, the equilibrium point will likely end up closer to point   Multiple Choice A B C D

Q: marginal propensity to consume (MPC) is 0.8. The following graph shows the aggregate demand curves…

A: Answer in step 2.

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: Q6. How does fiscal policy affect the economy?

A: Answer: Fiscal policy: fiscal policy refers to the policy of government in which the government…

Q: Suppose actual real GDP is $13.19 trillion, potential real GDP is $12.96 trillion, the marginal…

A: Marginal Propensity to Consume(MPC): The marginal Propensity to Consume refers to the proportion of…

Q: Which of the following is the best example of an automatic stabilizer? O national defense…

A: The automatic stabilizer is a type of fiscal policy (i.e., increases public spending and decreases…

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: Unemployment insurance and welfare programs work as automatic stabilizers. True False

A: True. Unemployment insurance and welfare programs do function as automatic stabilizers.Here's…

Q: Suppose, the Australian economy is in good shape (operating at its productive capacity Y*). However,…

A: Due to increase in spending and fiscal expansion,interest rates would be lowered.

Q: According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the…

A: Spending multiplier measures the rate of change in national income arising from a change in…

Q: Explain how the conduct of fiscal policy affects consumption and investment in equilibrium.

A: Fiscal policy is a macroeconomic policy that is implemented by the government for monitoring and…

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: Which of the following is a category of fiscal policy?A) government policies regarding transfer…

A: Since you posted multiple subpart questions, we will provide the answer for first three subpart…

Q: Fiscal policy of increasing government expenditures can be more potent than monetary policy in…

A: Fiscal policy works through changes in government expenditures and changes in taxes, while monetary…

Q: According to the classical macroeconomic model, expansionary fiscal policy has an inflationary…

A: Fiscal Policy is a policy by which the governments adjusts its amount of expenditure and taxes…

Q: Suppose equilibrium GDP is less than full-employment output and the economy is in a recession. What…

A: If the economy is in a slump and equilibrium GDP is below full employment, the government's goal…

Q: Suppose equilibrium GDP is less than full-employment output and the economy is in a recession. What…

A: Fiscal policy is used by government to make the economy going normal without any fluctuations. The…

Q: During a recession, the government decides to give an additional child tax credit to households of…

A: Recession occurs when there is a fall in the aggregate demand in the economy. The fall in the…

Q: Suppose actual real GDP is $7.91 trillion, potential real GDP is $13.33 trillion, the marginal…

A: Marginal Propensity to Consume(MPC): The marginal Propensity to Consume refers to the proportion of…

Q: Expansionary fiscal policy will: a shift the aggregate demand curve left. b shift the aggregate…

A: Fiscal Policy refers to the policy that the government undertakes to either increase economic growth…

Q: Suppose actual real GDP is $13.56 trillion, potential real GDP is $12.34 trillion, and the marginal…

A: Given Actual real GDP =$13.56 trillion Potential GDP =$12.34 trillion.Marginal propensity to consume…

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=…

Q: 36) An automatic fiscal stabiliser is      A) a monetary or fiscal policy that aims to smooth out…

A: The business cycle occurs when there is ups and downs in the gross domestic product along its trend…

Q: Which of the following is not an automatic stabilizer. Pick a,b,c, or d A) Sales tax B)State…

A: Automatic stabilizer brings the economy back to full employment.

Q: I need an explanation for part b) of the following questions. Scatter Diagrams and High-Low Cost…

A: First we have to know that a cost estimating equation develop with a fixed cost and variable cost.…

Q: Fiscal policy of increasing government expenditures can be more potent than monetary policy in…

A: Fiscal and monetary policy: Fiscal policy signifies the policies taken by the government of an…

Q: Suppose that autonomous consumption (a) is 300, private investment spending(I) is 420, government…

A: We know, from the basic macroeconomic identity, that  Y = C(Y - T) + I + G Here, we have I = 420, T…

Q: Which type of discretionary fiscal policy is likely to have the smallest overall effect on GDP…

A: Discretionary fiscal policy is the government policy to control economic growth and aggregate…

Q: Suppose the economy begins at full employment. Label this starting point as point "1." Then,…

A: Aggregate supply: The aggregate supply or AS is a macroeconomic concept. The total amount of…

Q: List what specific, deliberate actions the federal government could take to enact expansionary…

A: Expansionary fiscal policy is aimed at increasing aggregate demand when the economy is in a…

Q: How relevant is the multiplier concept to the implementation of expansionary and contractionary…

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

Q: Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal…

A: Initially, due to the tax cut of 50,000,000 the spendings of people rose by the MPC (given as 0.9).…

Q: On the following graph, AD1 represents the initial aggregate demand curve in a hypothetical economy,…

A: a) Based on the graph, the initial short-run equilibrium level of real GDP is $10 trillion and the…

Q: Consider the Keynesian Cross model. If the fiscal multiplier equals 2, and the government decides to…

A: Fiscal multiplier =2 Increase government spending by 100

Q: An expansionary fiscal policy can increase the level of aggregate demand by reducing corporate tax…

A: The term "fiscal policy" refers to a government's approach to influencing the state of the economy…

Q: Why will a temporary tax increase be insignificant in reducing consumption expenditures by the…

A: Taxes are obligatory commitments that a government office, whether nearby, provincial, or…

Q: Differentiate between the expansionary fiscal policy and contractionary fiscal policy with diagram…

A: Fiscal Policy: Fiscal policy is used to influence aggregate demand and maintain stability in the…