Question

Assume demand-pull inflation has occurred and real GDP is currently $100 billion more than the full...

Assume demand-pull inflation has occurred and real GDP is currently $100 billion more than the full employment level of real GDP. The MPC is 0.75. Should government spending be increased or decreased? By what amount?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Inflation in general terms is the general rise in the price level of goods and services in an economy over a given period of time

Demand pull inflation is when an economy is having more demand as compared to supply which causes rise in the average price level of goods and services

Here according to given question due to demand pull inflation the real GDP has increased by $100 billion so government spending will also increase

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
Assume that recession has occurred and real GDP is currently $250 billion less than the full...
Assume that recession has occurred and real GDP is currently $250 billion less than the full employment level of real GDP The MPC is 0.80. Determine whether government spending should be increased or decreased, and by what amount, to retur the economy to full employment real GDP.
If MPC = 0.9, equilibrium real GDP is $1,000, and full-employment real GDP is $2,000, then...
If MPC = 0.9, equilibrium real GDP is $1,000, and full-employment real GDP is $2,000, then how much should government spending change to bring about full employement?
Refer to the table given below. Suppose that aggregate demand increases such that the amount of...
Refer to the table given below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Real Output Demanded (Original) Price Level Real Output Supplied $506 116 $513 508 108 512 510 100 510 512 92 507 514 84 502 a. By what percentage will the price level increase? percent b. Will this inflation be demand-pull inflation or will it be cost-push inflation? (Click to select)Demand-pull inflationCost-push inflation c....
Suppose that the MPC = 0.75 and the MPIM = 0.15. Full employment real GDP is...
Suppose that the MPC = 0.75 and the MPIM = 0.15. Full employment real GDP is equal to $1000 million and actual real GDP is $750 million. What change in government spending is necessary to bring the economy to full employment? A. change in G = $100 million B. change in G = $200 million C. change in G = $250 million D. change in G = $625 million E. change in G = $1250 million
If real GDP is currently $200 billion, and the potential GDP is $300 billion, we can...
If real GDP is currently $200 billion, and the potential GDP is $300 billion, we can conclude with certainty that: Select one: a. the GDP gap is $500 billion. b. there is no GDP gap c. the GDP gap is $100 billion. d. the economy is operating at full employment.
In 1993, Congress failed to pass President Clinton's $16 billion economic stimulus package intended to create...
In 1993, Congress failed to pass President Clinton's $16 billion economic stimulus package intended to create jobs. A major criticism was that his new government spending was not matched by tax increases. Assume (for this problem) a similar situation exists now and the U.S. economy is below full employment and Congress had passed a law that requires than an increase in government spending of $16 billion be matched or balanced by an equal increase in taxes. The MPC = 0.75...
1. Assume an economy is opersting below its full employment capacity and the MPC is .75,...
1. Assume an economy is opersting below its full employment capacity and the MPC is .75, a $50 billion increase in investment spending will cause the equilibrium output to rise by a)$5 billion b) $50 billion c) $10 billion d) $200 billion 2. when business and consumers become more optimitic about the future and increase their expenditures? a) real GDP rises and employment falls b) real GDp falls and employment rises c) real GDP and employment and income to decline...
67891011121314151610610510410310210110099989796PRICE LEVEL (CPI)REAL GDP (Billions of dollars)ASFull EmploymentAD1AD3AD2AD2 The initial short-run equilibrium level of real GDP...
67891011121314151610610510410310210110099989796PRICE LEVEL (CPI)REAL GDP (Billions of dollars)ASFull EmploymentAD1AD3AD2AD2 The initial short-run equilibrium level of real GDP isbillion, and the initial short-run equilibrium price level is. Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, which curve in the previous graph will most likely be the new aggregate demand curve? AD1AD1 AD2AD2 AD3AD3 As a result, the equilibrium level of...
(c) Assume that current real gross domestic product falls short of full-employment output by $500 billion...
(c) Assume that current real gross domestic product falls short of full-employment output by $500 billion and the marginal propensity to consume is 0.8. (i) Calculate the minimum increase in government spending that could bring about full employment. (ii) Assume that instead of increasing government spending, the government decides to reduce personal income taxes. Will the reduction in personal income taxes required to achieve full employment be larger than or smaller than the government spending change you calculated in part...
Suppose that the economy is in a long-run equilibrium at a price level of 100 and...
Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $100 billion increase in aggregate demand. In order to restore the economy to full employment, given a MPC of 0.80, government purchases would need to:
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT