Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 32, Problem 6MCQ
To determine
The value of the government expenditure multiplier.
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Students have asked these similar questions
Calculate the government spending and tax multipliers for each income bracket, considered separately.
MPC
Tax Multiplier
Income/spending
Multiplier
Household income
0-$30,000
$31,000-50,000
$51,000-80,000
$80,000 and above
0.9
0.8
0.75
0.6
Explain carefully why the tax multiplier is negative and why it is smaller in absolute value than the government expenditure multiplier.
Suppose that real GDP for an economy is currently 16,000 billion, the government
purchases multiplier is 2.2 and the tax multiplier is -1.2.
If the government deploys additional spending of 600 billion and cuts taxes by 120
billion, where will GDP end up (in billion)?
Chapter 32 Solutions
Foundations of Economics (8th Edition)
Ch. 32 - Prob. 1SPPACh. 32 - Prob. 2SPPACh. 32 - Prob. 3SPPACh. 32 - Prob. 4SPPACh. 32 - Prob. 5SPPACh. 32 - Prob. 6SPPACh. 32 - Prob. 7SPPACh. 32 - Prob. 8SPPACh. 32 - Prob. 9SPPACh. 32 - Prob. 10SPPA
Ch. 32 - Prob. 1IAPACh. 32 - Prob. 2IAPACh. 32 - Prob. 3IAPACh. 32 - Prob. 4IAPACh. 32 - Prob. 5IAPACh. 32 - Prob. 6IAPACh. 32 - Prob. 7IAPACh. 32 - Prob. 8IAPACh. 32 - Prob. 9IAPACh. 32 - Prob. 10IAPACh. 32 - Prob. 11IAPACh. 32 - Prob. 1MCQCh. 32 - Prob. 2MCQCh. 32 - Prob. 3MCQCh. 32 - Prob. 4MCQCh. 32 - Prob. 5MCQCh. 32 - Prob. 6MCQCh. 32 - Prob. 7MCQCh. 32 - Prob. 8MCQ
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- Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?arrow_forwardThe government lowers $0.9 trillion in taxes, restoring GDP from $10 trillion to its potential level of $11.2 trillion. What is the value of the tax multiplier? A -1.33 B -0.9 C -0.75 D -1 E -1.2arrow_forwardCalculate the government spending multiplier and the tax multiplier if the MPC is 0.6. Show your workarrow_forward
- Why is the tax multiplier smaller than the government spending multiplier?arrow_forwardA. If your MPC = 0.6 and government spending (G) increases by $800. What will happen to the equilibrium income? The Effect of Taxation: Tax Multiplier = -MPC X Spending Multiplier Problems: B. If the MPC = 0.8 and taxes go up by $1000, what will happen to the equilibrium income? Please fully complete both problems.arrow_forwardSuppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000arrow_forward
- If the MPC is 0.9, then the tax multiplier is a. -0.1 b. -1.11 c. -9 d. -10arrow_forwardIf the MPC is 0.5, the tax multiplier is Select one: a. -1 b. -2.5 C. -1.67 d. -2arrow_forwardSuppose the MPC is 0.8. What is the tax multiplier in this economy? If the government were to lower taxes by $250 in this economy how much would Total Spending change as a result? Show your work.arrow_forward
- The Government and Fiscal Policy (chapter 16) Why is the tax multiplier smaller than the government spending multiplier? Note: please do not give a copy & paste answer from Chegg. or course heroarrow_forwardWhat's the tax multiplier if MPC = 0.75? Select one: a. -4 b. -3 С. 3 d. 0.33arrow_forwardSuppose 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 $200arrow_forward
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