Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Question
Chapter 29, Problem 5RQ
To determine
Multiplier.
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Check out a sample textbook solutionStudents have asked these similar questions
Suppose consumption function is specified as C= $200 + 0.75Ya planned investment is $600, net taxes are $400, and
government spending totals $500 of a hypothetical economy in 2020. Find algebraically: LO 3
A. The equilibrium level of aggregate output by equating aggregate output and planned aggregate expenditure.
B. Consumption when aggregate output is at the equilibrium level.
C. Saving when aggregate output is at the equilibrium level.
D. Establish that leakages equal injections at the equilibrium level of aggregate output.
During 2019, a country reported that its real GDP increased by $3.0 billion. If the slope of its
aggregate planned expenditure curve is 0.9, then which of the following might have led to the
increase in real GDP?
O a. Investment decreased by $0.3 billion.
on
O b. Exports increased by $0.3 billion.
O c. Exports decreased by $0.3 billion.
O d. Imports increased by $0.3 billion.
O e.
Government expenditure on goods and services increased by $3 billion.
Which 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
0.2
Chapter 29 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
Ch. 29.2 - Prob. 1QQCh. 29.2 - Prob. 2QQCh. 29.2 - Prob. 3QQCh. 29.2 - Prob. 4QQCh. 29.7 - Prob. 1QQCh. 29.7 - Prob. 2QQCh. 29.7 - Prob. 3QQCh. 29.7 - Prob. 4QQCh. 29 - Prob. 1DQCh. 29 - Prob. 2DQ
Ch. 29 - Prob. 3DQCh. 29 - Prob. 4DQCh. 29 - Prob. 5DQCh. 29 - Prob. 6DQCh. 29 - Prob. 7DQCh. 29 - Prob. 8DQCh. 29 - Prob. 1RQCh. 29 - Prob. 2RQCh. 29 - Prob. 3RQCh. 29 - Prob. 4RQCh. 29 - Prob. 5RQCh. 29 - Prob. 6RQCh. 29 - Prob. 7RQCh. 29 - Prob. 8RQCh. 29 - Prob. 9RQCh. 29 - Prob. 1PCh. 29 - Prob. 2PCh. 29 - Prob. 3PCh. 29 - Prob. 4PCh. 29 - Prob. 5PCh. 29 - Prob. 6PCh. 29 - Prob. 7PCh. 29 - Prob. 8PCh. 29 - Prob. 9PCh. 29 - Prob. 10P
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Similar questions
- Given that marginal propensity to save (MPS) is 0.5, what is the multiplier? O 2 O 4 0.5arrow_forwardAn economy has a consumption function of C = 20 + 0.75(YD), taxes = 10+0.2(Y), investment equal to 10, government expenditure equal to 15, exports equal to 15, and an import function of M = 10. 1) What is the equilibrium real GDP for this economy? O A. 156.25 O B. 146.88 Oc. 106.25 O D. 150.50 2) What is the multiplier for a change in government spending for this economy? O A. 3.5 O B. 2.5 O c. 3.0 O D. 4.0arrow_forwardIf government spending rises by $100, mps = 0.2, then the GDP multiplier is O 5 O 4 O 1arrow_forward
- What is the initial change in consumption if an economy's MPC is 0.75 and there is a decrease in taxes of $1 billion? O $1.75 billion O $1 billion O $1.33 billion O $0.75 billionarrow_forwardADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 60 + 08Y Assume further that planned investment lo government spending G, and net exports X are independent of the level of real GDP nd constant at lg 40, G= 0, and Xp= 10. Recall also that, in equilibrium, the real output produced () is equal to aggregate expenditures: Y= C+lg+ G+ Xp Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy S 1050 b. What happens to equilibrium Yif lg changes to 20? 950 What does this outcome reveal about the size of the multiplier? Multiplier=arrow_forwardSuppose that Country X's government wants to increase output. If the multiplier equals 2.5 and the government increases spending by 300, how much will output increase by? O 750 O 200 50 100arrow_forward
- GDP $0 1 2 Consumption $0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 D 8 4.5 As shown in Exhibit 9-1, if equilibrium GDP is $5 trillion, then the total of investment, government spending, and net exports is: 8 4.5 As shown in Exhibit 9-1, if equilibrium GDP is $5 trillion, then the total of investme O $1 trillion. $2 trillion. O $3 trillion. O $4 trillion. $6 trillion. 4 Aggregate Expenditures 6 Unplanned inventoryarrow_forwardSuppose an economy has no imports (MPI, m = 0). The MPC (c) is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The multiplier is in real GDP from the increase in investment is and the change billion. O a. 5; $16 O b. 4; $25 O C. 5; $25 O d. 4; $16 e. 0.75; $3arrow_forwardAssume a closed economy, that taxes are fixed, and the marginal propensity to consume is equal to 0.66. What is the government spending multiplier? O 1.51 3.33 3.03 33.3arrow_forward
- b. Using the model from this chapter, explain the effect on GDP from an increase in G by $5 billion. An increase in spending by $5 billion will add A. directly to Eisposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect. O B. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 billion times the simple multiplier. O C. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, ie. national income will change by less than $5 billion.arrow_forwardUse the consumption function shown to answer the following questions. 110- At what level of income is consumption equal to disposable income? $ billion. 100 C = Y. Which of the following statements is true? O A. Consumption is $30 billion when the income level is $100 billion. O B. Saving equals consumption at an income level of $40 billion OC. At an income level of $0 billion there is dissaving equal to $20 billion. D. At an income of $100 billion there is dissaving of $30 billion. 90 80- 70 60- 50- 40 30- 20 10- 10 20 30 40 s0 60 70 Bo 90 100 110 Real Disposable Income ($ billions) Planned Real Consumptionarrow_forwardA $1.5 trillion increase in investment (a component of autonomous expenditure) leads equilibrium expenditure to increase from $7.0 trillion to $10.5 trillion. In this case, the multiplier is O a. 10.5. O b. 4.67. O C. 2.33. O d. 1.50. O e. 7.00.arrow_forward
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