Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal propensity to consume is 0.9. What is the total amount of additional economic activity that results from this tax cut?

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

A: The aggregate expenditure (AE) is the total expenditure by the economy. In other words, it is also…

Q: What is a budget surplus? Outline the benefits and use of a budget surplus in macroeconomic…

A: The government expenditure level and the amount of tax collection determine whether the government…

Q: Suppose the government increases expenditures by $50 billion and the marginal propensity to consume…

A: Aggregate demand is the sum of Consumption, Investment, government spending and net export. So, AD =…

Q: Imagine this economy has a 10% tax on income. The following are exogenous (not directly affected by…

A: Given, C = 3 + 0.72Y, G = 11                 I = 4 X = M = 0

Q: Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is…

A: In the economy the equilibrium occurs at the point where the output produced in the economy (Y) is…

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: Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have…

A: Let us take the equilibrium condition of the goods market - Y = C + I + G  Where , C = c0 + c1 (Yd )…

Q: Fill in the missing values in the following table. Assume that the value of the MPC does not change…

A: MPC says the **the ratio of the additional money dollar of income which consumers expend, not…

Q: Why is a $100 billion increase in government spending on goods and services more expansionary than a…

A: According to the aggregate expenditure model Total income (Y) = Consumption (c +b(Y-Taxes) +…

Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…

A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…

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: 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by…

A:

Q: Consider an economy described by the following equations:   C = 300 + 0.90 (Y – T)…

A: Government spending multiplier = 1 / 1 - MPC Government spending multiplier = - MPC / 1 - MPC

Q: Assume that the consumption function is given by C = 150 + 0.85(Y – T) and the tax function is given…

A: Given; Consumption Function; (C)=150+0.85(Y-T) Tax function (T)= t0+t1Y where; C= consumption Y=…

Q: The economy is described by the following functions: Shown in Picture where ?t is the tax rate.…

A: Multiplier associated with government purchases is the total change in income with change in…

Q: Assume the MPC is 0.8. If government were to impose $20 billion of new taxes on household income,…

A: Given MPC = 0.8 New taxes imposed = $20 billion

Q: Suppose a closed economy with no government spending which in equilibrium is producing an output and…

A: Remember the tax multiplier is less than the government spending multiplier. And we know that the…

Q: Suppose that real GDP for an economy is currently 16,000 billion, the government purchases…

A: Fiscal policy refers to the actions taken by the government to intefere in the economic activity and…

Q: Suppose the MPC is 0.8. The government wants to decrease Total Spending by $600. How should it…

A: MPC=0.8 Total Spending=$600 Multilplier= Change in Y/Change in G=1/1-MPC 600/Change in G=1/1-MPC

Q: 000 00-50,000 00-80.000 0.9 0.8 0.75

A: Spending multiplier = 1 / 1-MPC Tax multiplier = Spending multiplier – 1

Q: Which of the following statements is true?

A: Government spending refers to the amount of expenditure carried out by the government on the…

Q: An economy Is described by the following equations: C = 500 + 0.85(Y - T), Cis consumption, Y is…

A: C=500+0.85(Y-T) M=0.05(1-t)Y IP=1500 G=400 T=ty

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 a tax rate of 1/3 of national income were introduced, what would be the new equilibrium level of…

A: C = 10 + 0.75Y  I = 20 G = 40    Now; T (taxes) = 1/3*Y or 0.33Y   Thus; C = 10 + 0.75(Y-T)

Q: Help with the following exercises please show formula and step by step 1)  Assume the MPC is 0.70…

A: 1. (a) To calculate the initial impact on real GDP, we can use the expenditure multiplier, which 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: If the equilibrium GDP is 4000 billion, full employment GDP is 5000 billion, marginal prosperity to…

A: Marginal propensity to consume (MPC) = 0.80Spending multiplier = 1(1-MPC) = 1(1-0.80) = 10.2 =5…

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: Suppose that the government decreases its autonomous spending by $100 billion and also decreases its…

A: Gross domestic product is the sum of a country's final goods and services. The increase in GDP…

Q: What would it take to convert a sales tax into a true consumption tax? Senator Smith has suggested…

A: A tax on products and services that are consumed or used by people or households is known as a…

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: Imagine this economy has a 10% tax on income. The following are exogenous (not directly affected by…

A: Given, C = 3 + 0.72Y, G = 11                 I = 4 X = M = 0

Q: 16. Suppose that planned investment and planned government purchases do not depend on income: I = 15…

A: Equilibrium refers to a point of balanced situation in the economy. At the equilibrium, aggregate…

Q: n economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T =…

A: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY

Q: What happens if there is a rise in the marginal propensity to consume (MPC) a) Lowers the value of…

A: In an economy, any change in the proportion of consumption from the given income has a multiplier…

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…