In a private closed economy where MPC= 0.8, if consumers reduce their spending by $20 billion and firms cut investments by $10 billion, then equilibrium GDP will decrease by
Q: Suppose that the level of GDP increased by $300 billion in a private closed economy where the…
A: Answer: Given, Change in GDP ∆GDP=$300MPC (marginal propensity to consume)=0.9Change in aggregate…
Q: Suppose the MPC is .90 and the MPI is .10. If government expenditures go up $ 100 billion while…
A: The expenditure multiplier shows the impact of change in autonomous spending on total spending and…
Q: In a closed economy, consumers spend $300 regardless of the level of income, and the marginal…
A: closed economy can be defined as one of that has no trading activity with outside economies its…
Q: If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200…
A: Answer: Given, MPC (Marginal Propensity to consume) = 0.8 Recessionary Expenditure Gap= $200 To find…
Q: Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively,…
A: The marginal propensity to consume is a statistic that quantifies induced consumption, which…
Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80…
A: A negative output gap also known as recessionary output gap is when the long run output exceeds the…
Q: Assume that the MPC is 0.9 and investment falls by $30 billion. What is the change in real GDP?
A: mpc is 0.9. Multiplier(M)= 1/1-mpc
Q: It is known that the data of an economy is as follows: the amount of autonomous consumption…
A: In an economy; Autonomous consumption expenditure= 500 billion Every time Y increases by 1 billion…
Q: If the MPC In an economy Is 0.80, government could close a recessionary expenditure gap of $100…
A: Meaning of Money Multiplier: As from the word, the money multiplier refers to the situation under…
Q: An economy has the following consumption function: C=$200+0.8DI . The government budget is balanced,…
A: The equilibrium in a macroeconomic model emerges when the aggregate demand for final goods , which…
Q: Using more data points results in an estimated MPC of 0.65 for Africa. In December, the Africa…
A: How much investment going to multiply in the economy depends on how much the household sector…
Q: Suppose GDP is 10.3 trillion, taxes are 1.8 trillion, private saving is 1.2 trillion and public…
A: The disposable income is the income which is left after paying taxes. This income can only be either…
Q: Fiscal policy of increasing government expenditures can be more potent than monetary policy in…
A: Fiscal policy works through changes in government expenditures and changes in taxes, while monetary…
Q: suppose the government wishes to illuminate recessionary GAP of 100 billion and the MPC is .75. How…
A: The multiplier shows the change in real GDP as a result of a change in the autonomous expenditure.…
Q: If MPC was equal to 0.5, would doubling your income double your consumption spending
A: The marginal propensity to consume (MPC) refers to the incremental change in income that is consumed…
Q: Suppose the MPC is .80, the MPI is .10, and the income tax rate is 10 percent. What is the…
A: Given that, MPC = 0.80, MPI = 0.10 and income tax rate is 10 percent.
Q: You are given the following information about a closed economy with no government: Consumption =…
A: Autonomous spending means that it is not dependent on the level of income(Y). Therefore, we put it…
Q: Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making…
A: If MPC=0.8 then MPS=1-MPC MPS=1-0.8 MPS=0.2
Q: Explain the consumption function for a closed economy with a government sector
A: Consumption (C) is the usage of commodities and services by a household. The consumption function…
Q: If the MPC in an economy is 0.9, a $4 billion increase in government spending will ultimately…
A: MPC or Marginal Propensity to Consume measures the increase in spending with the increase in…
Q: Suppose that autonomous consumption (a) is 300, private investment spending(I) is 420, government…
A: In the Keynesian model, the aggregate expenditures or national income can be determined by using the…
Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…
A: The marginal propensity to consumer (MPC) refers to the change in the change in the consumption…
Q: Suppose an economy has an MPC = 0.875. 1. If government spending increase by $100, how much…
A: In economics, the marginal propensity to consume is a metric that quantifies induced consumption,…
Q: If the MPC is 0.8 and government spending decreases by $50 million, then equilibrium GDP will…
A: The equilibrium GDP:The equilibrium GDP can be calculated as follows:
Q: Equilibrium output is 1000, MPC is 1/2 and taxes are zero. Government spending is 20 and net exports…
A: The income equation is given as Y = C+I+G+NX Here consumption is 1/2*Y= MPC which is 1/2*1000= 500…
Q: Find MPC from the given consumption function Y=2+0.2Y
A: The given consumption function is: C=2+0.2Y
Q: Given a MPC of 0.75, if consumer spending decreases by $300 billion, we would expect RGDP to…
A: MPC=0.75 Decrease in consumer spending=$300
Q: Suppose that the government increases taxes and government purchases by equal amounts. What happens…
A: National income is the total value of final products and services manufactured in a country.
Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of S80…
A: Given data: MPC is 0.80 Expenditure gap is $80 billion
Q: Suppose economists observe that an increase in government spending of $10 billion raises the total…
A: Marginal Propensity to Consume (MPC) refers to the level of additional consumption expenditure due…
Q: Suppose the following data for an economy; a consumption function of C = 800 + 0.8Yd, Investment…
A: Aggregate expenditure is the sum of consumption spending, investment spending and government…
Q: Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal…
A: Initially, due to the tax cut of 50,000,000 the spendings of people rose by the MPC (given as 0.9).…
Q: The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if the…
A: The Keynesian model would result in the determination of the price level and the real GDP. The…
Q: What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary?…
A: The marginal propensity to consume (MPC) measures the change in the consumption spending of…
Q: In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the…
A: In Keynesian macroeconomics when the price level in the economy is assumed to be fixed then planned…
Q: The investment multiplier is: negatively related to the MPS. positively related to the…
A: The investment function shows the positive relationship between investment and income. It means as…
Q: Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will…
A: Y= $32000 C= 5000 + (MPC)Y I= 1500 G= 2000 NX= -500 Equilibrium level of output; Y= C+I+G+NX
Q: net taxes were lowered from $5000 to $1000, the MPC is .75, and autonomous consumption spending is…
A: Disposable income refers to the remaining amount after paying all the necessary taxes.
Q: The aggregate expenditure function in a simple macroeconomic model with a close economy and no…
A: Generally, the equation of aggregate expenditure in an open economy is: AE = C + I + G + NX. here, C…
Q: The equilibrium level of output for an economy is given as R2420m, with autonomous spending of…
A: The current level of output is R2420m The autonomous spending is R968m…
Q: Question 24 In the definition of marginal propensity to consume, marginal refers to the amount of…
A: Consumption function is a sum of autonomous and induced consumption. Autonomous consumption is…
Q: As shown in Exhibit 2, dissaving occurs: Group of answer choices at $5 trillion. between 0 and $4…
A: The 45° line is the GDP or the total output line. Savings is the portion of income that is not…
Q: If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will a. decrease…
A: The pending multiplier denotes the ratio of change in the real GDP to the change in the initial…
Q: In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and…
A: Given the MPC = 0.90 Reduction in consumption = $5 billion Decrease in investment = $4 billion
Q: Suppose the president is successful in passing a $10 billion tax increase. Assume that taxes are…
A: Tax multiplier is a fiscal multiplier which measures the multiples of change in gross domestic…
Q: If the MPC in an economy is .8, the increase in real GDP can occur (aggregate demand curve can shift…
A: Multiplier = 1/ [1 - MPC] The required increase in government spending = Total increase in aggregate…
Q: Suppose a closed economy with no government spending or taxing is capable of producing an output of…
A: closed economy with no government spending or taxing is capable of producing an output of $1600 at…
Q: Calculating the MPSAnd MPC. In one year a consumer income increase by $200 and her consumption…
A: Income of the consumer split into 2 parts - MPC and MPS , so here we calculate the MPC and MPS which…
In a private closed economy where MPC= 0.8, if consumers reduce their spending by $20 billion and firms cut investments by $10 billion, then equilibrium
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and firms cut investments by $4 billion, then equilibrium GDP will decrease bySuppose an economy has an MPC = 0.875. 1. If government spending increase by $100, how much will the GDP change?Suppose the MPC = 0.6? What will be the government spending multiplier? If, in this economy, government spending (G) increases by $300, what will happen to Total Spending? Show your work
- If the MPC in an economy is .8, government could close a recessionary expenditure gap of $200 billion by cutting taxes by?If the MPC in an economy is 0.9, a $4 billion increase in government spending will ultimately increase consumption bySuppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10. What is the equilibrium GDP (income)? Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier? Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
- Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,500?C = 5,000 + (MPC)YI = 1,500G = 2,000NX = -500In a closed economy, what determines consumption, investment, and government expenditures? Please include in your answer the form of the consumption function, investment function, and government expenditure function.Suppose that autonomous consumption is 1,500, government purchases are 500, planned investment spending is 1,000, net exports are - 250, and the MPC is 0.8. Equilibrium GDP is equal to $- (Enter your response as an integer.)
- Suppose the MPC is 0.8. The government wants to decrease Total Spending by $600. How should it change G to achieve this goal? Show your work?If the MPC in an economy is 0.90, a $4 billion increase in government spending will ultimately increase real GDP byYou are given the following information about a closed economy with no government:Consumption = 445 + 0.75Y Investment = 250 Calculate the equilibrium level of income.