MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 9, Problem 4DQ
To determine
To describe: That one dollar spent can create multiple chain of increased income and expenditure.
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Students have asked these similar questions
1. In France and Germany, it is difficult for a
household to increase its borrowing based on
an increase in the market value of the house.
In addition, large down-payments (as a
percentage of the house price) are required
for house purchases. a. On the basis of this
information, how would you expect a rise in
house prices in France or Germany to affect
spending by households? b. In the US or UK,
loans are more easily available based on a rise
in home equity and only a small down-
payment is required. How would you expect
your answer to question 1 to change when
considering the US or UK? c. What do you
conclude about the role of the financial
accelerator in France and Germany compared
with the UK and the US?
List the 3 major revenue sources and 3 major expenditures in the 2022-2023 U.S. budget.How much (approximate %) of the budget is NOT mandatory, interest or defense spending.What is meant by the term “mandatory” in this context? How do you think that this realistically affects efforts to balance the budget?.
Which best describes why the multiplier exists?
When people spend money, that money ends up in the pockets or bank accounts of other people or organizations, who
then use that money in some way.
The multiplier exists because money spent today is always more valuable than money spent in the future, due to
inflation and interest rates.
When people see other people spending money, they know that the economy is about to improve, leading them to spend
more money.
When people see the government spending more money, they realize that the government thinks that prices are low;
thus, they believe it is a good time to buy things.
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- Consumers of a country spend 83.21% of their disposable income. If the government wants to increase national income by $1,521.97 Trillion, how much should taxes need to change by? Make sure to include a negative sign for negative values. Round your answer to the nearest two decimal place. Write your answer in billions of dollars so if your answer is 10 billion, write 10.arrow_forwardIf the government wants to increase the amount of savings in the economy, how should it alter government spending? What effect will this action have on the interest rate in the economy? Explain it using simple sentences ( not more than 10).arrow_forward2) Fred has income of $100,000 this year and $120,000 next year. Fred can borrow at an interest rate of 8% or lend at an interest rate of 2%. Draw Fred's budget constraint between spending this year and spending next year labeling all significant points.arrow_forward
- My friend Marie decides to set aside $200 from her paycheck every month. How will this affect her demand curve? (You don't have to use specific numbers, just explain) When Marie sets aside money from her paycheck, this is the same thing as a decrease in her income. Remember that when income increases, the demand curve shifts outwards to reflect the increase in spending. In this case, Marie's demand curve will shift inwards as she tries to economize more than usual. She will buy fewer goods, even if the prices don't change. Illustrate in grapharrow_forwardMake sure to show your work to get credit. 1. Assume: Yd = $194,000 b = .90 a = $ 8,000A)What is consumption (C) ?B)What are savings (S) ? C)What is APC ?D)What is APS ?arrow_forwardMake sure to show your work to get credit. 1. Assume: Yd = $194,000 %D b = .90 a = $ 8,000 A)What is consumption (C) ? B)What are savings (S) ? C)What is APC ? D)What is APS ?arrow_forward
- Suppose people can consume the income they earn or save and invest it at rate ?. If we tax wealth at a rate greater than ?, how are people likely to adjust their rate of savings?arrow_forwardKefer to the following graph to answer the question that follow. Interest rate Line 1 6% 5% Line 2 $300 Savings and investment (billions of dollars) In the figure, at an interest rate of 4%, the: $200 quantity demanded of loanable funds equals the quantity supplied of loanable funds, and equilibrium is reached. quantity demanded of loanable funds is greater than the quantity supplied of loanable funds, and there is a surplus of loanable funds. demand for loanable funds is greater than the supply of loanable funds, and there is a shortage of loanable funds: quantity demanded of loanable funds is greater than the quantity supplied ofarrow_forwardPlease answer part 4 only Suppose a government decides to pass a tax cut, while keeping the level of government spending the same. How can the government finance the tax cut? What is the impact of the tax cut on public saving? Will private saving be affected and, if so, how? If households save most of (but not all) the tax cut, how will this affect investment? How will this affect the equilibrium interest rate? and why?arrow_forward
- The cost of rebuilding the Philippines after typhoon Haiyan could reach USD 5.8bn”, a senior official has said. Assume the government of Australia Department of Foreign Affairs and Trade provided a grant of USD 5.8 billion. Also assume that despite the hardships the Philippine families experienced, 15% was the beneficiary savings from the Australian grant. Further, assume all other factors remain constant.a. Calculate the total effect of the spending multiplier of the Australian government grant on the Philippine economy GDP growth. b. Examine the overall multiplier effect of the USD5.8 billion grant on the Philippine economy. Answer asap n correctly with proper typed explanationarrow_forwardAn increase in savings implies a decrease in consumption and therefore a decrease in GDP.True/False and Explain .arrow_forwardUse the following information for all of the questions in this Check Point: Y $14 trillion C= $8 trillion | = $3 trillion TR = $1 trillion T= $3 trillion Enter your answers as whole numbers only (no decimals, no $). For example, if the answer is $7 trillion, you would only enter 7 as your a Question 1 What would government purchases be equal to? $ trillion. Question 2 What would private saving be equal to? $ trillion. Question 3 What would public saving be equal to? $ trillion.arrow_forward
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