Question

Suppose the MPC in an economy is 0.7. If taxes were to increase by $10 billion,...

Suppose the MPC in an economy is 0.7. If taxes were to increase by $10 billion, what would happen to the aggregate expenditure line?

Select one:

a. The expenditure line would shift down by $10 billion

b. The expenditure line would shift up by $10 billion

c. The expenditure line would shift down by $7 billion

d. The expenditure line would shift up by $7 billion

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the MPC in an economy is 0.7. If taxes were to increase by $10 billion,...
Suppose the MPC in an economy is 0.7. If taxes were to increase by $10 billion, what would happen to the aggregate expenditure line? Select one: a. The expenditure line would shift down by $10 billion b. The expenditure line would shift up by $10 billion c. The expenditure line would shift down by $7 billion d. The expenditure line would shift up by $7 billion
Suppose that the MPC is 0.75 and that this economy has lump sum taxes. 1. What...
Suppose that the MPC is 0.75 and that this economy has lump sum taxes. 1. What is the spending multiplier? 2. What is the tax multiplier? 3. What will happen to GDP if taxes increase by 1,200? 4. What would to GDP if spending decreases by 1,200? 5. What decreases in taxes would have the same effect on the economy as the increase in G in (d)? 6. Suppose that both income and taxes increase by 2,000. What is the...
Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession. a....
Assume that a hypothetical economy with an MPC of 0.75 is experiencing a severe recession. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? Instructions: Round your answer to two decimal places. $  billion b. How large a tax cut would be needed to achieve the same increase in aggregate demand? Instructions: Round your answer to two decimal places. Enter a positive value. $  billion c. Determine one possible combination of...
Assume that the MPC is .8 in an economy that has an aggregate supply curve with...
Assume that the MPC is .8 in an economy that has an aggregate supply curve with a slope of 1. Also, suppose that the price level is flexible downward. A decrease in investment spending of $10 billion will shift the aggregate demand curve leftward by: (Show Steps) A. $50 billion and decrease real GDP by $50 billion. B. $50 billion and decrease real GDP by $25 billion.100% C. $10 billion and decrease real GDP by $10 billion.    D. $10 billion...
In an economy, the MPC = 1.75. government needs to increase expenditures 520 to complete a...
In an economy, the MPC = 1.75. government needs to increase expenditures 520 to complete a project, but it does not want to increase debt, so it increases taxes s20 billion as well. Thus, there is balanced budget spending. What, if any, will be the change in output generated by this balanced-budget expenditure scenario, Change in output is $0 $15 billion increase $20 billion increase $20 billion decrease
7. Assume that the MPC is 0.9 and that the total crowding-out effect is $6 billion....
7. Assume that the MPC is 0.9 and that the total crowding-out effect is $6 billion. Government purchases increase by $10 billion. By how many billion will the aggregate demand shift? In which direction?
Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in...
Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. Also assume that GDP and consumption both rise by $6 billion in the second round of the process. Instructions: Round your answers to 1 decimal place. a. What is the MPC in this economy? b. What is the size of the multiplier? c. If, instead, GDP and consumption both rose by $8 billion in the second round,...
1.Suppose that for a particular economy and period, investment was equal to RM 200 billion, government...
1.Suppose that for a particular economy and period, investment was equal to RM 200 billion, government expenditure was equals to 100, net taxes[TA] were fixed at 150 and consumption was represented by below function C= 20+0.6YD a. What is the level of equilibrium income? b. What is the value of government expenditure multiplier? c. What is the value of the tax multiplier? d. If investment decline by RM100 billion, what will be the new equilibrium 2.Assume investment = 100, government...
Honduras is a small open economy (an open economy is an economy that trades with other...
Honduras is a small open economy (an open economy is an economy that trades with other countries). Suppose Honduras imposes a strict limit on the number of imports entering Honduras. As a result in the fall of imports the ________ will ________ and equilibrium output will ________. Group of answer choices: - 45-degree line; shift downward; increase - 45-degree line; shift downward; decrease - 45-degree line; shift upward; increase - 45-degree line; shift upward; decrease - planned expenditure curve (E);...
The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC...
The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC is 0.80, the multiplier is operative, and idle resources exist at each expenditure round. Government purchases rise by $10 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms ___________ the quantity of goods and services they produce, and Real GDP __________ by __________. a. TE; downward; fall; increase; rises; $10 billion. b. TP; rightward; fall; decrease; falls; $50...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT