Macroeconomics for Today
10th Edition
ISBN: 9780357161494
Author: Irvin B. Tucker
Publisher: Cengage Learning US
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Question
Chapter 9, Problem 17SQ
To determine
The required government spending to increase the real
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Students have asked these similar questions
Assume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.
Actual 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.
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.
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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Similar questions
- The relationship between changes in spending and Real GDP without price increase is: a. Economic Growth b. Demand Pull c. Multiplier Effect d. Fiscal Changearrow_forwardAssume that the short run equilibrium GDP is $4,000 billion and the potential GDP is $5,000 billion. The marginal propensity to consume is 0.8. [a] Would you classify this society more inclined to consume or save? Explain . [b] By how much would you advise the President to adjust the government spending and the taxes? Show your work.arrow_forwardYou Suppose the government increases education spending by $20 billion. If the marginal propensity to consume is 0.75, how much will total spending increase? Instructions: Round your response to one decimal place. $ billionarrow_forward
- 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.arrow_forwardThe image attached, is a screen shot of the question. The question is: If the marginal propensity to consume was 0.8, low large would each of the following need to be in order to restore full-employment equilibrium? A. A tax increase ________billion B. A government spending cut $_________billion C. A cut in income transfers $________billion. I need to know how to figure this out. Again the screen shot of the question with the graph it attached.arrow_forwardWhich of the following statements are correct? a. If the marginal propensity to consume increases, the equilibrium level of income will increase. b. In an open economy with a government sector the sum of the marginal propensity to consume and the marginal propensity to save is always equal to 1. c. If the tax rate decreases, the aggregate spending curve will shift parallel upwards. Select one: A. b and c B. b C. a and b D. a and carrow_forward
- 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? 1.5. How does CHANGE in PRICES effect your lives? 1.6. Explain why INFLATION usually accelerates during wartime? Macroeconomics and the goals of Macroeconomic policyarrow_forwardRefer to the figure below: Price Level (average price) PE PF E₂ Gap AD Excess AS E₁ AD2 AD1 5.8 6.0 6.2 QF Real Output (trillions of dollars per year) O Ⓡarrow_forwardAssume that the marginal propensity to consume is 0.6 and potential output is $1000 billion. If real GDP is $1100 billion: Select one: a. there is an inflationary gap. b. the economy is in long-run equilibrium. c. there is a recessionary gap. d. government transfers should be decreased.arrow_forward
- In 2009, the US Federal government cut taxes by approximately $300 billion, increased government spending by approximately $300 billion, and increased transfer payments by approximately $200 billion. Answer the following questions, assuming the marginal propensity to consume was 0.75. What was the maximum change in GDP from the government spending? Show your work.arrow_forwardWhat can we predict about the effect on consumption of an increase in government spending? A) Consumption will increase by an amount equal to the MPC times the change in real GDP. B) Consumption will increase by an amount equal to the MPC times the change in government spending. C) Consumption will increase by the amount of the government spending. D) Consumption will not rise as government spending risearrow_forwardThe marginal propensity to consume (MPC) is 0.75. The multiplier is 4. (Round your answer to one decimal place.) Suppose that government spending changes by S- 400. The change in real GDP will be S . (Round your answer to the nearest dollar.)arrow_forward
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