Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 28, Problem 7SPA
To determine
Identify the real GDP and explain the reason of real GDP increase by more than $5 billion.
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The country is experiencing a serious rise in inflation which the government wants to control through fiscal policy. The Government will decrease spending by $20 million and increase taxes by $15 million. The marginal propensity to consume (MPC) is 0.80. What will be the effect on GDP and by how much?
Chapter 28 Solutions
Macroeconomics
Ch. 28.1 - Prob. 1RQCh. 28.1 - Prob. 2RQCh. 28.1 - Prob. 3RQCh. 28.2 - Prob. 1RQCh. 28.2 - Prob. 2RQCh. 28.2 - Prob. 3RQCh. 28.2 - Prob. 4RQCh. 28.3 - Prob. 1RQCh. 28.3 - Prob. 2RQCh. 28.3 - Prob. 3RQ
Ch. 28.4 - Prob. 1RQCh. 28.4 - Prob. 2RQCh. 28.4 - Prob. 3RQCh. 28.4 - Prob. 4RQCh. 28 - Prob. 1SPACh. 28 - Prob. 2SPACh. 28 - Prob. 3SPACh. 28 - Prob. 4SPACh. 28 - Prob. 5SPACh. 28 - Prob. 6SPACh. 28 - Prob. 7SPACh. 28 - Prob. 8SPACh. 28 - Prob. 9SPACh. 28 - Prob. 10SPACh. 28 - Prob. 11SPACh. 28 - Prob. 12SPACh. 28 - Prob. 13SPACh. 28 - Prob. 14SPACh. 28 - Prob. 15APACh. 28 - Prob. 16APACh. 28 - Prob. 17APACh. 28 - Prob. 18APACh. 28 - Prob. 19APACh. 28 - Prob. 20APACh. 28 - Prob. 21APACh. 28 - Prob. 22APACh. 28 - Prob. 23APACh. 28 - Prob. 24APACh. 28 - Prob. 25APACh. 28 - Prob. 26APACh. 28 - Prob. 27APACh. 28 - Prob. 28APACh. 28 - Prob. 29APACh. 28 - Prob. 30APACh. 28 - Prob. 31APACh. 28 - Prob. 32APACh. 28 - Prob. 33APACh. 28 - Prob. 34APA
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- MPC in an economy is 0.8. if investment is increased by dollar 5 million, how much would be increase in income.arrow_forwardif consumption is $3.8 trillion, investment is $1.1 trillion, government spending is $1.1 trillion, imports are $1.6 trillion, and exports are $1.4 trillion, how much is GDP?arrow_forwardAn increase in interest rates increases investment spending and increases consumption spending. decreases investment spending and increases consumption spending. decreases investment spending and decreases consumption spending. increases investment spending and decreases consumption spending.arrow_forward
- In a closed economy, GDP is $1000, government purchases are $200, consumption is $700 and the government has a budget surplus of $25. Using the given information calculate: a) investment, b) taxes, c) public saving.arrow_forwardSuppose that business executives are very optimistic, and they raise their investment spending. What happens to the expenditure line? How will this affect real GDP? The expenditure line shifts up and real GDP increases by more than the amount of the shift. The expenditure line shifts up and real GDP decreases, The expenditure line shifts down and real GDP decreases by more than the amount of the shift. The expenditure line shifts down and real GDP increases.arrow_forwardThere is an increase in investment of $2000 million in an economy. MPC is given to be as 0. Calculate the total increase in income.arrow_forward
- If in an economy MPC is 0.8 and investment increase by $10 billion. Calculate the increase in income.arrow_forwardIf the MPC is 0.8 and the investment in a country increases by $900 billion calculate the total increase in income?arrow_forwardConsider an economy in which GDP is $8.2 trillion, public saving is -$0.2 trillion, taxes are $0.9 trillion, private saving is $3.0 trillion, export is $0.6 trillion, and import is $0.5 trillion. Calculate government purchases. Calculate national saving and investment. Calculate consumption.arrow_forward
- If MPC =.6 and government purchases increases by $5 billion, GDP will increase by $3 billion $30 billion $12.5 billion $1.25 billionarrow_forwardIn a closed economy, consumers spend $300 regardless of the level of income, and the marginal propensity to consume (MPC) is 0.75. Investment is equal to $200. The government spends $400 and collects $50 in taxes. The equilibrium level of GDP in this economy is $arrow_forwardThe MPC measures the relationship between: a change in consumption and a change in income. change in consumption and savings. changes in consumption and changes in savings. the proportion of income to consumption at any given level of income. the total level of consumption and the total level of saving.arrow_forward
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