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
Q: a) Given the following values of consumption, investment, and government purchases (all in (in…
A: Aggregate expenditure is sum of consumption expenditure, govt expenditure and investment in the…
Q: Which fiscal policy would be the most contractionary? a $100 billion decrease in government spending…
A: The fiscal policy represents the use of government spending and taxation. To foster strong and…
Q: 1. Use the following information to fill in the gaps in the table. MPC is constant, and investment,…
A: Answer: The formula of MPC: MPC=Change in consumptionChange in incomeMPC at…
Q: Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to…
A:
Q: If the Marginal Propensity to Consume (MPC) is .90, estimate the total (multiplied) effect of…
A: Marginal propensity to consume (MPC): The MPC is defined as the ratio of change in consumption due…
Q: Suppose the MPC is 0.8 and the crowding out effect is $30 billion. The government aims to increase…
A: Gross domestic product (GDP) is the standard measure of the value added created through the…
Q: Consider a simple model where consumption is C = c(Y-T), Y-T is disposable income, c is the marginal…
A: Fiscal multiplier (FM): It is the ratio of change in total output to change in taxes FM=∂Y∂T This…
Q: Fiscal policy refers to the: O deliberate changes in government spending and taxes to stabilize…
A: Fiscal policy is related to government.
Q: Instructions: In the table, enter your answers as a whole number. Round your answers for the MPC and…
A: a) MPC = ∆C/∆Y From the given table, ∆C = 80 ∆Y = 100 Hence MPC (c) = 80/100 = 0.8
Q: Assume that equilibrium real GDP is $ 800 billion, potential real GDP is $ 950 billion, the MPC is…
A: The spending multiplier refers to the measure which explains the increase in the real GDP due to an…
Q: Suppose a closed economy with no government spending which in equilibrium is producing an output and…
A: Given information, Actual output generated: 2250 Marginal propensity to consume: 0.75 Potential…
Q: Assume that, without taxes, the consumption schedule for an economy is as shown in the first two…
A: Please find the attached calculation below-
Q: 1. Use the following information to fill in the gaps in the table. MPC is constant, and investment,…
A: As we answer only 3 subparts and the question contains more than 3 subparts, we would be answering…
Q: 2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate…
A: There is an output gap of $32 billion. To fill out this o/p gap or to help the economy to come out…
Q: Fiscal policy is the use of government tax and expenditure policy to influence the economy O True O…
A: Fiscal policy is used by government to influence aggregate demand and real GDP in the economy.
Q: Assume that initial GDP is $1,000 and we want to expand it to $1,600. Average MPC for the country is…
A: Economists use the marginal propensity to save (MPS) to measure the link between income and savings.…
Q: 2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate…
A: Given: Deficient aggregate demand=64 billion Economist A: Government spending multiplier=8, Tax…
Q: Suppose a closed economy with no government spending which in equilibrium is producing an output and…
A: Tax multiplier represents the multiple by which GDP increases or decreases in response to a decrease…
Q: Assume the government makes no fiscal policy changes when the economy experiences a downturn. Which…
A: In the mentioned question we have been asked what would be expected when the economy is turndown.
Q: A) 200 B) 100 C) 500 D) 300 Answer: D Diff: 2 Topic: Fiscal Policy at Work: Multiplier Effects…
A: Short run equilibrium is the point where the aggregate supply is equal to the aggregate demand in…
Q: Use the following information to answer questions 1, 2, and 3. Suppose that the government of…
A: The aggregate demand would result in the fact that the it would be the sum of the aggregate…
Q: Some politicians have suggested that Conada enact a constitutional amendment requiring the federal…
A: A government budget is a paper prepared by the government and/or other political body that presents…
Q: suppose the government wishes to illuminate recess or a gap of 100 billion in the MPC is .075 how…
A: Given, Gap = 100 billion MPC = .075
Q: To combat a recession, the Indian government enacts expansionary fiscal policy, which increases…
A:
Q: Suppose that autonomous consumption (a) is 300, private investment spending(I) is 420, government…
A: We know, from the basic macroeconomic identity, that Y = C(Y - T) + I + G Here, we have I = 420, T…
Q: Suppose economists observe that an increase in government spending of 700 crore taka that raises the…
A: Given : Increase in government spending = 700 crore taka Increase in aggregate demand = 900 crore…
Q: Which of the following would be classed as an expansionary fiscal policy? An increase in the money…
A: An expansionary fiscal policy is a policy from government to expand aggregate demand without any…
Q: Suppose the government implements fiscal consolidation by cutting spending while the nominal…
A: Fiscal consolidation refers to the situation when government tries to reduce its fiscal deficit by…
Q: 1. Using the following information: C = 200 + 0.9Yd | = 250 G = 100 T= 100 Ya = Y-T, is disposable…
A: The three-sector model includes three economic sectors which are household, government, and…
Q: 1. Using the following information: C = 200 + 0.9Yd | = 250 G= 100 T= 100 Ya = Y-T, is disposable…
A: Equilibrium is reached where Income is equal to aggregate expenditure in the economy, given by sum…
Q: Given C=500 + 0.80Y, I = 100, G=100, and the government decides to finance G by also increasing…
A: C=500 + 0.80Y I=100 G=100 T=100 tY=0.25Y
Q: The government lowers $0.9 trillion in taxes, restoring GDP from $10 trillion to its potential level…
A: Tax multiplier calculates the ratio of change in GDP(gross domestic product) and T(tax).
Q: The following equations describe an economy. (Think of C , I , G , etc., as being measured in…
A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…
Q: a) What are the three fiscal policy tools and how would each be used to counter a contractionary…
A: Hello, Thank you for the question. Since there are multiple questions posted here, only the first…
Q: An economy is described by the following equations: Y = C+ I, + G %3D C = a + b(Y – T) T = tY %3D…
A: a) At the equilibrium, Y = C+ Ip +G Y = a + b(Y-T) +Ip +G Y = a + b(Y- tY) +Ip +G Y = 20 +0.75(Y-…
Q: Mexico's real GDP fell from 4.5 trillion pesos to 3.8 trillion pesos over the first part of 2020. In…
A: To get the tax cut multiplier: Decrease in real GDP or it also represents disposable income =…
Q: Government expenditures represents one of the injections of expenditure. Explain how an increase in…
A: In the circular flow of economy, leakages reduce the flow of income in the economy and injections…
Q: 1) Assume that Canadian government taxes away $0.15 of each dollar of new income, that 35% of the…
A: Disclaimer: “Since you have asked multiple questions, we will solve the first question for you. If…
Q: Compute the amount the government would have to increase spending to close the output gap according…
A: Fiscal policy is the use of government spending and taxation to influence the economy.. Fiscal…
Q: Figure 16-7 Price level P₁ P₂ P₁ LRAS LRAS (8 C SRAS, SRAS AD₁ AD₂ 0 Y₂ Ya Real GDP (trillions of…
A: Interest rate: - it is the percentage charge on the principal amount by a lender to a borrower.
Q: 4. In the US the unemployment rate for January 2000 was 4.0%. In January 2000, the US had GDP of…
A: Answer to the three sub parts are as follows:
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?Which of the following is NOT a tool of fiscal policy. O taxes O government spending Onterest rates none of the above Question 2 Assume the economy is in a deep recession. The appropriate fiscal policy response would be to: raise taxes and raise govemment expenditures cut taxes and cut govermment expenditures raise taxes and cut government expenditures O cut taxes and increase government expenditures D Question 3 Crowding out refers to the fact that: Tax cuts will cause inflation O Tax cuts may result in higher interest rates which will "crowd out" business investment spending O increased government spending will crowd out spending on imports none of the aboveFigure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 6 on4m21 3 Tax Revenue B Tax Size Refer to Figure 8-23. If the economy is at point A on the curve, then a small increase in the tax rate will O increase the deadweight loss of the tax and increase tax revenue. O increase the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and increase tax revenue. O decrease the deadweight loss of the tax and decrease tax revenue.
- What are the three injection into the income-expenditure flow? O Government Spending, Consumer Spending. Exports O Goverment Spending. Investment, Exports : O Government Spending, Investment, Imports"The United States has the world'slargest fiscal deficit in total USdollars." Could anything be changedin this statement to correctly evaluatewhether the United States has a fiscaldeficit problem? a. We need to know how large theUS debt is already. b. Deficits should be expressed asa per cent of GDP to correctlyevaluate them. c. All of the information givenhere is necessary to correctlyevaluate whether the UnitedStates has a fiscal deficitproblem. d. We need to know whether thedeficit has occurred during aninflationary gap or arecessionary gap.Which of the following statementsabout how fiscal policy should mostappropriately be used in a crisis iscorrect? a. If fiscal policy is usedappropriately, a fiscal deficitshould appear duringrecessionary gaps and asurplus during inflationary gaps b. Fiscalpolicy should be used at anyand all points of the cycle toaccelerate growth c. None of these statements iscorrect d. If fiscal policy is usedappropriately, a fiscal surplusshould appear duringrecessionary gaps and a fiscaldeficit during inflationarygaps
- Some politicians have suggested that the United States enact a constitutional amendment requiring that the Federal government balance its budget annually. Such an amendment, f strictly enforced, would force the government to enact a contractionary fiscal policy whenever the economy experienced a severe recession. This is because when the economy enters a recession, 0000 net tax revenue falls and transfer payments rise. Balancing the budget would require raising transfer payments and raising taxes. net tax revenue rises and transfer payments fall. Balancing the budget would require raising transfer payments and lowering taxes. net tax revenue falls and transfer payments rise. Balancing the budget would require lowering transfer payments and raising taxes net tax revenue rises and transfer payments fall. Balancing the budget would require lowering transfer payments and lowering taxesWhen Amy's income increased her average tax rate decreased trom 20 peroent to 15 percent. When Alice's income increased. her average tax tate increased hom 20 percent to 2 percent When Juke's income incremed, his average tax rate didn't change Ives in an economy witha pgressive ta ystem pays a proportional te and lives in an economy with a regressive ta ystemm OA. Ale Ay Jake 0B Amy Alice Jake OC. Alce, Jake, Amy O D. Jake, Amy Alice100 T. 80 G 60 40 O $ 100 200 300 400 500 600 700 800 900 GDP Refer to the diagram, in which Tis tax revenues and Gis government expenditures Al figures are in billons of doltars if the ful-employment ODP400 billion while the actual GDP is $200 billion: (Show your calcutations) a. What is the actual budget deficit? b. What is the cyclically adjusted budget deficit? c. The value of cyclically adjusted deficit identifies which type of discretionary fiscal policy? 20 G T.G ($)
- 15. If consumers in a country spend 3/4 of their disposable income. If their governmentincreases its spending by 75 trillion and in order to maintain a balanced budgetsimultaneously increases taxes by 75 trillion. Calculate the effect of the 75 trillion change ingovernment spending and 75 trillion change in taxes on the country’s aggregate demand.Which of the following is carried out in an expansionary fiscal policy? O a. Higher taxes and lower government expenditure O b. Lower taxes and higher government expenditure O c. Higher taxes and higher government expenditure O d. Lower taxes and lower government expenditure.When government spending increases by $1, planned expenditures increase by $1 O A. times the spending multiplier and the equilibrium level of income will increase by $1. O B. and the equilibrium level of income will increase by $1. O C. and the equilibrium level of income will increase by $1 times the spending multiplier. O D. and the equilibrium level of income will increase by less than $1. When taxes are cut by $1, planned expenditures O A. decrease by $1 and the equilibrium level of income will decrease by $1 times the tax multiplier. O B. increase by less than $1 and the equilibrium level of income will increase by $1 times the tax multiplier. OC. increase by $1 and the equilibrium level of income will increase by S1 times the tax multiplier. O D. increase by $1 and the equilibrium level of income will increase by $1 times the spending multiplier. Click to select your answer! V560