Given: initial equilibrium = $50,000 and the MPC = .8 a. Calculate the spending multiplier. b....

Given: initial equilibrium = $50,000 and the MPC = .8

a. Calculate the spending multiplier.

b. If planned investment decreases by $1500, calculate the CHANGE in equilibrium.

c. Calculate the new total equilibrium.

Expert Solution

Rahul Sunny answered 3 years ago

Suppose MPC is 0.3, use the spending multiplier to fill in the values for an autonomous...

Suppose MPC is 0.3, use the spending multiplier to fill in the values for an autonomous government spending of $700. Year Autonomous Spending National Income Change in Income Year 1 $ 700b N/A Year 2 Year 3 Year 4 What are some of the problems with the spending multiplier? (10 Points) [You must review the literature about the multiplier]

How does the multiplier process work when there is an initial decrease in autonomous spending?

1. A decreasing MPC leads to a spending multipler that is a) becomes indefinable b) decreasing...

1. A decreasing MPC leads to a spending multipler that is a) becomes indefinable b) decreasing c) increasing d) constant 2. What would you recommend to eliminate a recessionary gap? a) decrease consumptio b) decrease government spending c) increase taxes d) increase investment 3. regarding keynes, an economy will have long term high unemployment if a) its total spending is too low b) firms make too many investments c) markets operate freely d) the government runs a budget deficit 4.when...

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...

1. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the...

1. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the recessionary or inflationary gap, if any. a) AE= 250 +.75Y , Yf= 1200 b) AE= 400+ .9 Y, Yf= 3000 c) AE= 300 +. 8Y, Yf=1500 d) AE= 300+ .67 Y, Yf=1000

Let’s assume a simple Keynesian depression economy with a multiplier of 4 and an initial equilibrium...

Let’s assume a simple Keynesian depression economy with a multiplier of 4 and an initial equilibrium income of $3,000. Saving and investment equal $400, and assume “full employment” income is $4,000. (a) What is the value of the MPC? (b) The value of the MPS? (c) Assume the government plans to cover its spending by increasing taxes enough to run a balanced budget. How much will government spending and taxes have to rise to move the economy to full employment?...

7. What is the result of the spending multiplier if investment comes from savings? 8. Approximately...

7. What is the result of the spending multiplier if investment comes from savings? 8. Approximately how long is the period of the average real-estate-related business cycle?

Calculate the internal rate of return on the following projects: Initial outlay of $50,000 with an...

Calculate the internal rate of return on the following projects: Initial outlay of $50,000 with an after-tax cash flow of $10,000 per year for eight years. Initial outlay of $600,000 with an after-tax cash flow of $120,000 per year for ten years. Initial outlay of $25,000 with an after-tax cash flow $11,500 per year for three years.

8 steps in econometric methodology - 1-MPC=MPS - specific example will be given Always start with...

8 steps in econometric methodology - 1-MPC=MPS - specific example will be given Always start with introduction, then body, lastly conclusion.

NPV Calculate the net present value for a 25-year project with an initial investment of $50,000...

NPV Calculate the net present value for a 25-year project with an initial investment of $50,000 and a cash inflow of $8,000 per year. Assume that the firm has an opportunity cost of 18%. Comment on the acceptability of the project.

Question