Question

a) Suppose the marginal propensity to consume is 0.7, what will happen to real GDP if planned investment increases by $300 billion?b) Suppose the marginal propensity to save is .4, what how much will taxes have to change if real GDP decreases by $450 billion?

Answer #1

(a)We have used the investment multiplier in the formula from
which we get that * Real GDP will increase by $1,000
billion* with increase in planned investment by $300
billion.

(b) we have used the tax multiplier from which we get that a
$450 billion decrease in real GDP is caused by **increase in
taxes by $300 billion.**

Assume the following values: Marginal Propensity to
Consume b = 0.8; Autonomous Consumption a = 200; Investment
Spending I = 250. There is no government spending.
a) For a consumption function C = a + bY, what is the
equilibrium value for income Y in the economy? (The value at which
planned aggregate expenditure and planned output coincide.)
b) What changes when Investment Spending increases to 300? When
it drops to 225?
c) What effect can you observe in the...

Suppose that you have the following information for an
economy:
Marginal propensity to consume - MPC
0.80
Autonomous consumption - A
$500
Planned investment - PI
$600
Net exports - NX
-$400
Government spending - G
$300
You will need this information for the questions that
follow.
Part 1:
When real GDP is equal to $4,500, aggregate expenditure is equal
to $ .
Part 2:
When real GDP is equal to $5,000, aggregate expenditure is equal
to $ .
Part 3:
When real GDP...

Suppose disposable income is $1,000 when the average propensity
to consume is 0.75. Then
Group of answer choices
the marginal propensity to consume must be 0.75.
the slope of the consumption schedule must be 0.25
the level of saving is $250.
the average propensity to save must be 0.2
If the MPC is .70 and investment increases by $6 billion, the
equilibrium GDP will:
Group of answer choices
increase by $10 billion.
increase by $20 billion.
increase by $42 billion....

4. Keynesian Economics
a.What is the Keynesian consumption function?
b.What is the marginal propensity to consume?
c.Reread the textbook material on the simple Keynesian model
(pp.258–263, pp 226-230 in the eleventh edition).
i.
What is the multiplier?
ii. Suppose the marginal propensity to consume is 0.75.Compute the
multiplier
iii. Given the value you computed for the multiplier, compute the
amount by which real GDP
increases, when the government
increases purchases by $100 billion.
(Note:The value of the mpc...

The marginal propensity to consume is 0.5 as above. The federal
government wants to increase GDP by $100 billion. By how much
should government spending be increased? Suppose instead that the
government wants to achieve the same goal of increasing GDP by $100
million. Assuming lump-sum taxation, what is the required tax cut
in order to reach the target GDP?

Assume the marginal propensity to consume is 0.8 and potential
output is $800 billion. If actual real GDP is $700 billion, which
of the following policies would bring the economy to potential
output? a. Decrease taxes by $25 billion. b. Decrease government
transfers by $25 billion. c. Decrease taxes by $100 billion. d.
Increase taxes by $100 billion.

If the marginal propensity to consume is 0.87 what would the
impact on GDP of an increase of government spending of
$275,000,000.00. What is the Net stimulus?

Suppose the marginal propensity to consume is 0.5. If the
government believes aggregate demand is $500 billion below
potential and any increase in government spending will experience
$100 billion in crowding out, how much does the government need to
increase spending to have aggregate demand reach potential?

The government raises taxes by $100 billion. If the marginal
propensity to consume is 0.6, what happens to the following? Do
they rise or fall? By what amounts?
a. Public saving
b. Private saving
c. National saving
d. Investment

A real Keynesian model of a mixed economy with a marginal
propensity to consume equal to .9 produces an equilibrium level of
$2400 billion that is $600 billion below a full employment level of
output.
A) What change in government spending would bring about full
employment? Be sure to calculate the government spending
multiplier.
B) The resulting increase in real output have driven up real
interests rates from 3% to 4% and those higher real interest rates
reduced investment by...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 3 minutes ago

asked 3 minutes ago

asked 15 minutes ago

asked 15 minutes ago

asked 16 minutes ago

asked 17 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 32 minutes ago

asked 43 minutes ago

asked 51 minutes ago