Question

In: Economics

Consider a nation with a marginal propensity to consume of 0.75. a. What will its marginal...

Consider a nation with a marginal propensity to consume of 0.75.

a.

What will its marginal propensity to

save

be?

b.

What would happen to its consumption (give the direction and size of the effect) if

taxes (T) were to increase by 100, assuming th

at real aggregate income is

unaffected? What would happen to private saving? To public saving? To national

saving?

c.

Suppose, instead, that government purchases (G) increase by 100 while taxes

remain unchanged. Assuming that aggregate income is unaffected,

what would

happen to consumption? What would happen to private saving? To public saving?

To national saving?

Solutions

Expert Solution


Related Solutions

If the marginal propensity to consume is 0.75, how much is the spending multiplier? If the...
If the marginal propensity to consume is 0.75, how much is the spending multiplier? If the marginal propensity to consume drops to 0.5, how much is the new spending multiplier?
Suppose output and income is equal to 14000, the marginal propensity to consume is 0.75, and...
Suppose output and income is equal to 14000, the marginal propensity to consume is 0.75, and autonomous consumption is 300. Calculate total saving for this economy, assuming no public or foreign sector. (Round your answer to the nearest whole number.) Suppose the marginal propensity to consume in an economy is 0.9. What would be the Keynesian multiplier in this economy? (Express your answer as a whole number – no fractions or decimals)
The nation of Maximus has a marginal propensity to consume of .90 and the government has...
The nation of Maximus has a marginal propensity to consume of .90 and the government has decreased taxes by a lump-sum amount of $1 billion. Assume there is no international trade or changes to the aggregate price level. a. What is the value of the tax multiplier in Maximus? b. By how much will real GDP change after the $1 billion decrease in taxes? c. If the government wanted to accomplish the same increase in real GDP you found in...
10. If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion....
10. If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion. Suppose all other aggregate expenditure components are autonomous, based on the Keynesian model, what will be the overall effect on GDP? Select one: a. GDP will decrease by $20 billion b. GDP will increase by $15 billion c. GDP will decrease by $80 billion d. GDP will increase by $30 billion e. GDP will decrease by $26.7 billion 11. One of the most serious...
Calculate the government purchases multiplier if the marginal propensity to consume equals 0.75, the tax rate...
Calculate the government purchases multiplier if the marginal propensity to consume equals 0.75, the tax rate is 0.2, and the marginal propensity to import equals 0.3. Select one: a. 1.43 b. 1.6 c. 3.33 d. 4
1. If the marginal propensity to consume is 0.6, the marginal propensity to save is 0.4,...
1. If the marginal propensity to consume is 0.6, the marginal propensity to save is 0.4, and government spending increases by $2 billion at the same time taxes rise by $2 billion, equilibrium income will: rise by $2 billion. is the answer, I just dont know what steps to undertake to get the answer nor know what equation to use. 2. In the nation of Economia, the economy is over heating and there is danger of inflation. The chief economist...
Consider the data presented in Table 28P-1. a. What is the marginal propensity to consume for...
Consider the data presented in Table 28P-1. a. What is the marginal propensity to consume for households in this economy? b. Based on the assumptions of our aggregate expenditure model, fill in the columns for planned investment, government spending, and net exports. What is this type of expenditure called? c. For each level of actual aggregate expenditure, calculate unplanned inventory investment. d. What is the equilibrium level of aggregate expenditure in this economy? How do you know? e. For each...
1. What is the multiplier if the marginal propensity to consume (MPC) is 0.5? Calculate the marginal propensity to save (MPS)?
1. What is the multiplier if the marginal propensity to consume (MPC) is 0.5? Calculate the marginal propensity to save (MPS)?2. What is the multiplier if the MPS is 0.2? Calculate the MPC.3. As a percentage of GDP, savings accounts for a larger share of the economy in the country of Scania compared to the country of Amerigo. Which country is likely to have the larger multiplier? Explain.4. Assuming that the aggregate price level is constant, the interest rate is...
If the marginal propensity to consume is 0.9, the tax rate 0.35, and the propensity to...
If the marginal propensity to consume is 0.9, the tax rate 0.35, and the propensity to import 0.2, then the value of the multiplier is (to 3 decimal places):
Consider a closed economy, where the marginal propensity to consume is 0:9. What would be the...
Consider a closed economy, where the marginal propensity to consume is 0:9. What would be the e§ect on private, public and national saving of a $10 million decrease in both taxes and government spending? Would the equilibrium real interest rate increase, decrease, or stay the same?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT