Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Chapter ST4, Problem 1CQ
To determine
Explain the Keynesian concept.
Expert Solution & Answer
Explanation of Solution
According to Keynes, only the government intervention with increasing spending can stimulate the economy. When the government spends money, the investments will increase. An increase in the investments cause to increase the employment and thereby the output in an economy. On the final result, aggregate
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Chapter ST4 Solutions
Macroeconomics: Private and Public Choice
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- Suppose that a federal election is called at a time when the economy is experiencing a recessionary gap and there is a budget deficit. The leader of Party A promises, if elected, to immediately balance the budget by slashing government spending. The leader of Party B promises, if elected, to stimulate the economy with a tax decrease. What would be the effect of each party's proposed policy on each of the following. a. the level of GDP. b. the level of NTR. The effect of Party A's proposed policy on: (Click to select) (Click to select) c. the level of unemployment. (Click to select) d. the budget deficit. (Click to select) e. the price level (Click to select) The effect of Party B's proposed policy on: (Click to select) (Click to select) (Click to select) (Click to select) (Click to select)arrow_forwardWhich of the following is an example of an expenditure-increasing policy? a. a decrease in import quotas b. an increase in the money supply c. an increase in import tariffs d. higher income taxesarrow_forwardAn economy has three sectors: manufacturing, underwater basket weaving, and energy. Manufacturing sells 30% of its output to underwater basket weaving, 30% of its output to energy, and keeps the rest. Underwater basket weaving sells 10% of its output to manufacturing, 80% of its output to energy, and keeps the rest. Energy sells 40% of its output to manufacturing, 35% of its output to underwater basket weaving, and keeps the rest. If the economy is in equilibrium, and the value of energy is $8,500,000,000, find the value of underwater basket weaving. You are encouraged to use Octave for this problem. Your answer should be exact so use "format rat."arrow_forward
- What is the multiplier effect in economics? A. The tendency of consumers to save rather than spend B. The tendency of firms to reduce production during a recession C. The amplification of changes in spending through the economy D. The reduction of government spending to control inflationarrow_forwardWhich of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.arrow_forwardThe table below shows data for three fictitious countries. a. Compute the current MPC for each country. Instructions: Round your answers to two decimal places. Income and Consumption Data, Three Countries Change in Income (dollars) $9,830 40,000 5,870 Change in Consumption (dollars) $6,789 31,650 5,500 b. Which country has the highest marginal propensity to save (MPS)? (Click to select) c. If income in Bedrup increases by $360 and income in Cedrup increases by $690, which of the following statements is correct? Country Adrup Bedrup Cedrup MPC O Neither Bedrup nor Cedrup will save any dollars. O Cedrup will save more dollars. O Bedrup will save more dollars. O Dollar savings will be the same for both Bedrup and Cedrup.arrow_forward
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