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 29.7, Problem 4QQ
To determine
Real GDP .
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The relationship between changes in
spending and Real GDP without price
increase is:
a. Economic Growth
b. Demand Pull
c. Multiplier Effect
d. Fiscal Change
A drop in the price level will have what effect in the aggregate demand model and the​ income-expenditure model?A.decreases aggregate demand and planned expenditures.B.increases aggregate​ demand, but decreases planned expenditures.C.decreases aggregate quantity​ demanded, but increases planned expenditures.D.increases aggregate quantity demanded and planned expenditures.
1.4. The deflationary gap in an economy is calculated to be $700 billion. The marginal propensity to save (MPS) is 0.1
The marginal propensity to import is (MPM) 0.15
The marginal rate of taxation is (MPT) 0.1.
By how much would the government need change its spending on goods and services to eliminate the deflationary gap?
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1.5. How does CHANGE in PRICES effect your lives?
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1.6. Explain why INFLATION usually accelerates during wartime?
Macroeconomics and the goals of Macroeconomic policy
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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- Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded. a. True b. Falsearrow_forwardNow consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output. an increase; an increase a decrease; no change a decrease; a decrease None of the listed options is correct. no change; a decreasearrow_forwardIf the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________.  a.  higher; higher  b.  higher; lower  c.  lower; higher  d.  lower; lowerarrow_forward
- Which of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession? a. A cut in the marginal tax rate increases the incentives to find a job and work longer hours. b. Consumers will save a portion of a tax cut. c. The government may use the increase in expenditures on projects with little value, particularly, if it wishes to respond quickly. d. There is no evidence that tax cuts have been followed by increases in economic growth.arrow_forwardIf the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP $200 million, then by how much would they have to change taxes? A.decrease by $240 million. B.decrease by $160 million. C.decrease by $180 million. D.decrease by $50 million.arrow_forward1. If equilibrium national income is higher than the potential income at full- employment, there will be in the economy a.deflationary gap b.recessionary gap c.inflationary gap d. inequality gaparrow_forward
- Government spending on unemployment benefits, welfare, Medicare, and other programs during a recession are known as a. social safety nets (automatic stabilizers) that limit the hardships created by a deflationary gap b. additional expenditures the government should not have to pay c. social safety nets (automatic stabilizers) that increase the hardships created by a recession d. social safety nets (automatic stabilizers) that limit the hardships created by an inflammatory gaparrow_forwardActual output is $2,000, potential output is $2,500, and the marginal propensity to consume (MPC) is 0.8. Which will return the economy to potential output? Increase taxes by $125. Increase government spending by $500. Decrease taxes by $125. Increase government spending by $125.arrow_forwardConsider a tax cut which affects not only consumer disposable income, but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving. In the long run we would expect this tax cut to A decrease the level of real GDP. B decrease the price level. C increase both the price level and the level of real GDP. D decrease the price level and increase the level of real GDP.arrow_forward
- If the economy is in a recessionary period how, specifically, might the government use their three tools? three tools change the tax rate change the level of govertment spending change transfer paymentsarrow_forwardAssume the marginal propensity to consume is 0.8. To offset a fall in income of 1,000 the government should  a. raise taxes by $250. b. increase government spending and taxes by 1,000. c. increase taxes by $200. d. cut taxes by $200.arrow_forwardReductions in the personal income tax, often advocated by supply-siders to increase labor supply and effort, can be expected to also  a. decrease consumption spending.  b. increase export sales.  c. increase consumption spending.  d. decrease investment spending.arrow_forward
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