Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 13, Problem 2RQ
To determine
Combination of tax and expenditure.
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9. True or false? If the statement is false, explain why: LO4
a. An internally held public debt is like a debt of the left hand owed to the right hand.
b. The Federal Reserve and federal government agencies hold more than half the public debt.
c. As a percentage of GDP, the federal debt held by the public was smaller in 2010 than it was in 1990.
d. As a percentage of GDP, the total U.S. public debt is the highest such debt among the worldās advanced industrial nations.
QUESTION 16
If the marginal propensity to save is 0.1, the marginal propensity to import is 0.1 and the marginal tax rate is 0.2, how much would consumption increase if income
rises by Ā£8billion?
O a. 4.8
O b. 13.3
O c. 3.2
O d. 20
4
Suppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1
percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $190 billion at
each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an
expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of
return on investment by 1 percentage point, how much investment, if any, will be crowded out?
Instructions: Enter your answer as a whole number.
billion
%24
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- Suppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardEconomics Below is a tax table. Assume I earn $150 a year. My tax bracket is my marginal tax rate is I pay in taxes. my average tax rate is ; and O to $100 is 10% $101 to $200 is 15% $201 to $300 is 20% O 10%; 15%; 13.5%; $17.50 O 15%; 15%; 11.7%; $17.50 O none of these O 15%; 15%; 12.5%; $13.50arrow_forward13. Which fiscal policy would make a budget surplus larger or a budget deficit smaller? O lower taxes O increase in government purchases of goods and services O lower government transfers O higher interest ratesarrow_forward
- 5. LO 4 Suppose, as in the federal income tax code for the United States, that the representative con- sumer faces a wage income tax with a standard deduction. That is, the representative consumer pays no tax on wage income for the first x units of real wage income, and then pays a proportional taxt on each unit of real wage income greater than x Therefore, the consumer's budget constraint given by C wh -D + if wh- D=x., or C (1-wh-D+ tx+ if_wCh = D2 Now, suppose that the government reduces tax deduction x Using diagrams, determine the effects of this tax change on the consumer, and explain your results in terms of income and sub stitution effects. Make sure that you consider two cases. In the first case, the consumer does not pay any tax before x is reduced, and in the second case, the consumer pays a positive tax before x is reducedarrow_forwardWhich of the following changes in personal income tax would lead to the smallest increase in consumption? O a. O b. a $15 000 decrease in taxes, if MPC equals 0.6 O c. a $30 000 decrease in taxes, if MPC equals 0.25 Oe. a $20 000 decrease in taxes, if MPC equals 0.5 O d. a $12 000 decrease in taxes, if MPC equals 0.75 a $10 000 decrease in taxes, if MPC equals 0.2arrow_forwardSuppose the government incurs more debt to finance new military spending. To what extent will this impose a burden on future generations? O a. Government spending on military is considered investment expenditure. O b. Military spending does not at all benefit the future generations. O c. Government spending crowds out private investment spending. O d. Government debt needed to finance military expenditures is held by domestic entities.arrow_forward
- Suppose that the debt-to-GDP ratio is 0.53, the real interest rate on the debt is 6%, and the growth rate of real GDP is 3%. What is the maximum primary deficit or surplus (as a percentage of GDP) that the government can run and not increase the debt-to-GDP ratio? O A. 1.59% surplus O B. 1.59% deficit OC. 3.18% surplus O D. 3.18% deficitarrow_forwardIf the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. Ā O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardIf the real interest rate on government bonds is three percent, real GDP grows at one percent, the current debt-to-GDP ratio is forty percent and the primary budget deficit as a percentage of GDP is two percent, then the debt-to-GDP ratio will rise in a year by. percentage points. O a. 0.28 O b. 0.82 O c. 2.8 O d. 8.2 O e. 82arrow_forward
- Suppose that a family's income is exactly the same as the poverty threshold. This family's income deficit would be and their ratio of income to poverty would be O 0; 1 0 ; 0 1;0 O 1;1 Consider a family of four in 2008, whose poverty threshold is $22,024. If this family's total income was $12394, what would their income deficit be? income deficit: $arrow_forwardAssume the government makes no fiscal policy changes when the economy experiences a downturn. Which outcome would be expected? O Government expenditure to be higher and tax revenues to be lower, probably leading to a budget deficit. Government expenditure to be lower and tax revenues to be lower, probably leading to a budget surplus. O Government expenditure to be higher and tax revenues to remain the same, probably leading to a budget deficit. Government expenditure to be higher and tax revenues to be lower, probably leading to a budget surplus. O Government expenditure to remain the same and tax revenues to be lower, probably leading to a budget deficit.arrow_forwardThe figure shows government expenditure and revenue as a percentage of GDP, 1990-2019. During which of the following periods did the federal government run a budget surplus? 27.0% 25.0% -Expenditures 23.0% 21.0% 19.0% Receipts 17.0% 15.0% YEAR O 1998-2001 None of these answers is correct. O 2003-2008 2012-2018 PERCENT OF GDP 0661 1991 1993 1994 9661 2661 6661 0007 2002 2003 2005 9007 2008 6007 2011 2012 2014 2015 2017 2018arrow_forward
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