MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 19SQ
To determine
The impact of the increased tax and increased government spending by $100 million.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
ECONOMICS
An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4
billion.
The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.
Suppose the tax multiplier in an economy is -3. How will total spending (TS) change when taxes (T) decrease by $600?
Group of answer choices
a. TS will increase by $1800
b. TS will decrease by $1800
c. TS will increase by $200
d. TS will decrease by $200
A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009. At that time, the president’s economists estimated the multiplier to be
a.
2.4 for government purchases and 1.4 for tax cuts.
b.
3.2 for government purchases and 2.0 for tax cuts.
c.
1.6 for government purchases and 0.4 for tax cuts.
d.
1.6 for government purchases and 1.0 for tax cuts.
Chapter 11 Solutions
MACROECONOMICS FOR TODAY
Ch. 11.3 - Prob. 1YTECh. 11 - Prob. 1SQPCh. 11 - Prob. 2SQPCh. 11 - Prob. 3SQPCh. 11 - Prob. 4SQPCh. 11 - Prob. 5SQPCh. 11 - Prob. 6SQPCh. 11 - Prob. 7SQPCh. 11 - Prob. 8SQPCh. 11 - Prob. 9SQP
Ch. 11 - Prob. 10SQPCh. 11 - Prob. 11SQPCh. 11 - Prob. 1SQCh. 11 - Prob. 2SQCh. 11 - Prob. 3SQCh. 11 - Prob. 4SQCh. 11 - Prob. 5SQCh. 11 - Prob. 6SQCh. 11 - Prob. 7SQCh. 11 - Prob. 8SQCh. 11 - Prob. 9SQCh. 11 - Prob. 10SQCh. 11 - Prob. 11SQCh. 11 - Prob. 12SQCh. 11 - Prob. 13SQCh. 11 - Prob. 14SQCh. 11 - Prob. 15SQCh. 11 - Prob. 16SQCh. 11 - Prob. 17SQCh. 11 - Prob. 18SQCh. 11 - Prob. 19SQCh. 11 - Prob. 20SQ
Knowledge Booster
Similar questions
- Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?arrow_forwardWhat is true about the balanced budget multiplier? A. The balanced budget multiplier is positive because an increase in government expenditure increases disposable income. B. When both government expenditure and taxes decrease by $1, aggregate demand decreases. C. The balanced budget multiplier is equal to zero. D. The balanced budget multiplier is the magnification effect on aggregate demand of a simultaneous increase in aggregate demand and an equal decrease in taxes.arrow_forward20. If expansionary fiscal policy in the form of an increase in government spending causes offsetting in part the interest rates to rise, we would expect investment to increase in output. This offset is referred to as a. Increase; multiplier b. Decrease; crowding out c. Increase; crowding in d. Decrease; multiplierarrow_forward
- Give typing answer with explanation and conclusion Suppose that the typical Canadian spends 80 percent of their income. There is an income tax rate is 15% per period. If the government wanted to see the effect of a tax cut of $50 billion, what would be the tax multiplier that they would have to use.arrow_forward3. What will happen to the size of the expenditure multiplier and the size of the tax multiplier when the marginal propensity to save (MPS) increases?arrow_forwardUse the following equations for exercises 16–18. C= $100+.8Y I= $200 G= $250 X = $100.2Yarrow_forward
- 8. Given each of the following values for both the spending multiplier and the tax multiplier, calculate both the MPC and the MPS. a. 20 b. 10 c. 8 d. 5arrow_forward1. The multiplier effect of a change in government purchases Consider a hypothetical closed economy in which households spend $0.60 of each additional dollar they earn and save the remaining $0.40. The marginal propensity to consume (MPC) for this economy is 0.6 v , and the expenditure multiplier for this economy is v Suppose the government in this economy decides to increase government purchases by $400 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to v. This increases income yet again, causing a second change in consumption equal to The total change in demand resulting from the initial change in government spending isarrow_forward1. Consider an economy with the following situation: C = 50 +0.8 Yd =100;T= 100 G =150 a. Solve for Y, C, S b. How much is investment and government multiplier? Tax multiplier? c. Suppose full employment income is 900. Is this an inflationary or deflationary gap? How much is the gap? d. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. e. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?arrow_forward
- Answer exercises 11-14 on the basis of the following information. Assume that equilibrium real GDP is $800 billion, potential real GDP is $950 billion, the MPC is .80, and the MPI is .40.arrow_forward1. The multiplier effect of a change in government purchases Consider a hypothetical closed economy in which households spend $0.80 of each additional dollar they earn and save the remaining $0.20. The marginal propensity to consume (MPC) for this economy is 0.8 Suppose the government in this economy decides to increase government purchases by $400 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to $320 billion . This increases income yet again, causing a second change in consumption equal to $256 billion $2 trillion ($2,000 billion) The total change in demand resulting from the initial change in government spending is The following graph shows the aggregate demand curve (AD,) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD₂) after the spending multiplier effect takes place. Hint: Be sure that the new aggregate…arrow_forward4. Why does a reduction in taxes have a smaller multiplier effect than an increase in government spending of an equal amount?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Economics (MindTap Course List)EconomicsISBN:9781305260948Author:Irvin B. TuckerPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning