A decrease in exogenous government spending, offset by an equal decrease in exogenous taxes O leaves the budget deficit/surplus unchanged and increases aggregate expenditure. O leaves the budget deficit/surplus unchanged and reduces aggregate expenditure. O leaves the budget deficit/surplus unchanged

A decrease in exogenous government spending, offset by an equal decrease in exogenous taxes O leaves the budget deficit/surplus unchanged and increases aggregate expenditure. O leaves the budget deficit/surplus unchanged and reduces aggregate expenditure. O leaves the budget deficit/surplus unchanged

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by: O increasing government spending such that aggregate expenditures are increased. O raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased. O decreasing government spending such that aggregate demand is reduced. lowering average tax rates such that aggregate supply is increased. O increasing transfer payments such that aggregate expenditures decline.
The marginal propensity to consume (MPC) for this econamy is . and the spending multiplier for this economy is Suppose the govemment in this economy decides to decrease govemment purchases by $250 bilion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to second change in consumption equal to This decreases income yet again, causing a The total change in demand resulting from the initial change in government spending is The following graph shows the aggregate demand curve (AD ) for this economy before the change in govemment spending. Use the green line (trangie symbol) to plot the new aggregate demand curve (AD:) after the multiplier effect takes place. For simplioity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD) is paralel to the initial aggregate demand curve (AD). You can see the slope of AD by selecting t on the graph. 540 AD. AD, 130 100 OUTPUT (Tions of…
The economy of a country is characterized by the following equations: Aggregate consumption function C=100+0.50 (Yd), where Yd is the disposable income. Total taxes T=100, aggregate investment I= 100 and government expenditures G=100. What can be said about the budget about this country? O The balanced budget multiplier is greater than 1. The budget of the country is balanced. We cannot say anything about the budget. The country has a budget surplus. The country runs a budget deficit.
Which of the following would be classed as an expansionary fiscal policy? O A. An increase in the money supply Ов. A reduction in the number of goods exempted from VAT An increase in government taxation OD. An increase in government expenditure
Fiscal policy creates a multiplier effect because O The government always runs a deficit Government spending and tax changes will generate even more government spending O Government spending and tax changes will cause other economies to do the same thing. Government spending and tax changes will generate additional changes in consumer spending, creating more jobs, production and even more ripples of additional spending
Question 25 Which of the following is true regarding the simple tax multiplier? I has the same sign but larger magnitude than the simple fiscal multiplier. O It has the same sign but lower magnitude than the simple fiscal multiplier. O t has the opposite sign and lower magnitude than the simple fiscal multiplier. It has the opposite sign and a larger magnitude than the simple fiscal multiplier.
Currently, the US has a total consumption of $26,300,000, saving of $10,800,000, tax revenues of $11,500,000, and investment of $14,800,000. Calculate the size of this government's budget surplus. $___
The existence of lags in designing and implementing fiscal policy helps illustrate some of the limitations of fiscal policy aimed at easing the burdens of a recession. Which of the following statements best describes a situation when fiscal policy is more appropriate? O The Implementation lag is shorter than the recognition and legislative lags. O Demand-pull Inflation is expected to occur as the economy begins to self-correct. O To stimulate an economy that is in a severe recession or one that is slow to correct. O Fiscal policy favors tax cuts Instead of increased government purchases since this removes the legislative lag.
If taxes depend on income and the MPC is 0.8 and tis 0.4, the tax multiplier is Select one: O a. -2.7. O b. -1.92. O c. -2.5. O d. -1.54.
Government spending in Robok is $90 billion, and its only tax is an income tax with a marginal tax rate of 0.15. a. The balance on the government's budget at a GDP level of $380 billion is a (Click to select) v of $ billion. b. The balance on the government's budget at a GDP level of $700 billion is a (Click to select) v of $ billion. C. At what level of GDP will the economy of Robok have a balanced budget? Robok will have a balanced budget at a GDP level of $ billion.
component of the budget. 3ldentify the impact that each of the following changes in fiscal policy would have on the level of economic growth. a) A reduction in the budget deficit from $200 billion last year to $150 billion this year b) An unchanged budget surplus of $12 billion last year and this year c) A shift from a $15 billion deficit last year to a balanced budget this year. PrtScn F8 Home F9 F7 F6 F5 近

The formula for the government spending multiplier is A) 1/(1+ MPC). B) 1/MPS. O C) 1/MPC. O