MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 9, Problem 13SQ
To determine
The required government spending to increase the real GDP by $200 billion.
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Students have asked these similar questions
Macmillan Learning
What is the eventual effect on real GDP if the government
increases its purchases of goods and services by $60,000?
Assume the marginal propensity to consume (MPC) is 0.75.
What is the eventual effect on real GDP if the government,
instead of changing its spending, increases transfers by
$60,000? Assume the MPC has not changed.
An increase in government transfers or taxes, as opposed
to an increase in government purchases of goods and
services, will result in
O no change to real GDP.
O a smaller eventual effect on real GDP.
a larger eventual effect on real GDP.
O an identical eventual effect on real GDP.
Question: Use The Following Information To Work Problems 4 To 6. In
An Economy With No Exports And No Imports, Autonomous...
Use the following information to work Problems 4 to 6.
In an economy with no exports and no imports, autonomous consumption is $1 trillion, the marginal
propensity to consume is 0.8, investment is $5 trillion, and government expenditure on goods and services
is $4 trillion. Taxes are $4 trillion and do not vary with real GDP.
4. If real GDP is $30 trillion, calculate disposable income, consumption expenditure, and aggregate planned
expenditure. What is equilibrium expenditure?
5. If real GDP is $30 trillion, explain the process that takes the economy to equilibrium expenditure. If real
GDP is $40 trillion, explain the process that takes the economy to equilibrium expenditure.
6. If investment increases by $0.5 trillion, calculate the change in equilibrium expenditure and the multiplier.
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
Chapter 9 Solutions
MACROECONOMICS FOR TODAY
Ch. 9.4 - Prob. 1YTECh. 9 - Prob. 1SQPCh. 9 - Prob. 2SQPCh. 9 - Prob. 3SQPCh. 9 - Prob. 4SQPCh. 9 - Prob. 5SQPCh. 9 - Prob. 6SQPCh. 9 - Prob. 7SQPCh. 9 - Prob. 8SQPCh. 9 - Prob. 9SQP
Ch. 9 - Prob. 10SQPCh. 9 - Prob. 1SQCh. 9 - Prob. 2SQCh. 9 - Prob. 3SQCh. 9 - Prob. 4SQCh. 9 - Prob. 5SQCh. 9 - Prob. 6SQCh. 9 - Prob. 7SQCh. 9 - Prob. 8SQCh. 9 - Prob. 9SQCh. 9 - Prob. 10SQCh. 9 - Prob. 11SQCh. 9 - Prob. 12SQCh. 9 - Prob. 13SQCh. 9 - Prob. 14SQCh. 9 - Prob. 15SQCh. 9 - Prob. 16SQCh. 9 - Prob. 17SQCh. 9 - Prob. 18SQCh. 9 - Prob. 19SQCh. 9 - Prob. 20SQ
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- If output is above the level of spending balance, then A income will increase. the marginal propensity to consume will increase. C the marginal propensity to consume will decrease. income will decrease.arrow_forwardThe idea that new spending creates more new spending is known as the: a. crowding-out effect. b. multiplier effect. c. wealth effect. d. interest rate effect.arrow_forwardCalculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forward
- 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? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It, therefore,…arrow_forwardThe 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? A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease? An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million. The government decides to increase taxes. Assume that the MPC equals .80. What will be the tax increase? d. The government wants to achieve a balanced budget. It therefore…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_forward
- Multiplier Effect a. During a recessionary gap, is the goal to increase or decrease the equilibrium GDP? Will the change in spending be greater than, less than or equal to the change in the equilibrium GDP? b. c. In a given economy with an MPC of 0.8, the equilibrium GDP equals $630,000. If G increases by $70000, solve for the new equilibrium GDP that will result. In a given economy, with an equilibrium GDP of $280,000 both government purchases and taxes increase by $10,000. Solve for the new equilibrium GDP that will result from these two changes.arrow_forward5. In an economy, the MPC is 0.5. The graph on the right depicts the economy's aggregate demand curve. Suppose the economy starts out at Point A on the aggregate demand curve. Draw the AE curve for this case. a. b. C. d. Suppose an increase in the price level causes the economy to move to Point B on the aggregate demand curve. Draw the new AE curve. Suppose government spending decreases by $0.2T. Draw the new AD curve. In place of the change in part (c), suppose net taxes decrease by $0.2T. Draw the new AD curve. Price Level (P) 170 160 150 140 130 120 110 100 90 80 70 60 AD 2.6 3.0 3.4 3.8 4.2 4.6 2.8 3.2 3.6 4.0 4.4 4.8 Y (T of $)arrow_forwardThe the expenditures multiplier effect, the spending to bring about a given amount of increase in real GDP. smaller; larger smaller: smaller larger: larger larger: faster the change needed in governmentarrow_forward
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