Question

If the expenditure multiplier is 4 and government expenditure rises by ________, this will shift the...

If the expenditure multiplier is 4 and government expenditure rises by ________, this will shift the
AE upward by and the AD rightward by .__________
(A) 4; 25
(B) 4; 100
(C) 25; 400
(D) 25; 100

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans: The correct option is (d) 25; 100 because if expenditure multiplier is 4. This implies that the aggregate demand (AD) changes by the multiple of 4 of changes in government expenditure.

Changes in AD = Multiplier × Change in Government Expenditure ()

Thus if Change in Government Expenditure () is 25 and multiplier is 4 then

change in AD = 4 × 25 = 100

Thus if the government expenditure rises by 25 and the multiplier is 4 then AD will shift rightwards by 25 × 4 = 100

thus correct option is (d).

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
1.Which of the following is a true statement about the multiplier? * The multiplier effect does...
1.Which of the following is a true statement about the multiplier? * The multiplier effect does not occur when autonomous expenditures decrease The multiplier is a value between zero and one The smaller the MPC, the larger the multiplier The multiplier rises as the MPC rises 2.According to the Keynesian model of the macroeconomic, the most effective means for closing a recessionary gap is * Decrease in marginal tax rates which shift SRAS Increases in government spending which shift AD...
Which of the following would shift the aggregate expenditure line upward? A.) A decrease in government...
Which of the following would shift the aggregate expenditure line upward? A.) A decrease in government purchases B.) A decrease in expected future income C.) An increase in foreign real GDP D.) An increase interest rates
A decrease in the interest rate would cause the . A.) aggregate expenditure line to shift...
A decrease in the interest rate would cause the . A.) aggregate expenditure line to shift upwards, decreasing equilibrium real GDP B.) aggregate expenditure line to shift​ downward, decreasing equilibrium real GDP C.) aggregate expenditure line to shift​ downward, increasing equilibrium real GDP D.) aggregate expenditure line to shift​ upward, increasing equilibrium real GDP . Which of the following would shift the aggregate expenditure line upward? A.) A decrease in government purchases B.) A decrease in expected future income C.)...
Suppose that the fiscal policy multiplier is 8.6. What is MPC? Use that MPC and assume...
Suppose that the fiscal policy multiplier is 8.6. What is MPC? Use that MPC and assume that there is no crowding out in this economy. If the federal government knows that it will take a $750 billion rightward shift in AD to end a recession, how much does government spending need to be raised to accomplish that?
If the MPC in an economy is .8, government could shift the aggregate demand curve rightward...
If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by: decreasing taxes by $25 billion. increasing government spending by $25 billion. increasing government spending by $80 billion. decreasing taxes by $100 billion.
What is the​ multiplier? The multiplier is the amount by which the change in​ ______ expenditure...
What is the​ multiplier? The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. What does it​ determine? For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP. A. ​induced; induced B. ​induced; autonomous C. ​autonomous; induced D. ​autonomous; autonomous Why does it​ matter? The multiplier matters because we can use it to determine by how much we should...
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...
28- If autonomous spending rises, the expenditure equilibrium will rise by the increase in autonomous spending....
28- If autonomous spending rises, the expenditure equilibrium will rise by the increase in autonomous spending. the expenditure equilibrium will increase by the level of GDP times the expenditure multiplier. the expenditure equilibrium will fall by the increase in autonomous spending. the expenditure equilibrium will rise by the increase in autonomous spending multiplied by the expenditure multiplier. 31- An example of fiscal policy is an increase in autonomous spending by consumers. an increase in social security spending by the elderly....
how would an increase in the income tax affect the Keynesian government expenditure multiplier?
how would an increase in the income tax affect the Keynesian government expenditure multiplier?
6. Let the AE function be given by AE0 = 100$, mpe = 0.5, and the...
6. Let the AE function be given by AE0 = 100$, mpe = 0.5, and the change in AE = +50$. Fill in the following table: Employment Real Income Y=AP Original Aggregate Expenditure Subsequent Aggregate Expenditure 1 100$ 2 200$ 3 300$ 4 400$ ● Draw the economy in a graph. ● What is the multiplier in the economy? ● Let there be a change in AE from Government Expenditures of $50 in the economy. Arrive at the new Multiplier...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT