Question
In: Economics
Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8....
Consider the long-run model of a closed economy with a marginal
propensity to consume of 0.8.
Suppose the government cuts taxes by $100 billion while holding
government purchases constant. What
happens to the following variables? Explain and calculate the
amount of change for each variable.
a. Public saving (Sg):
b. Private saving (Sp):
c. National Saving (S):
d. Investment (I)
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Consider the closed-economy market-clearing model. Assume that the marginal propensity to consume is 0.8. The economy's...
Consider the closed-economy market-clearing model. Assume that
the marginal propensity to consume is 0.8. The economy's output
increases by $10 billion, tax revenue decreases by $6 billion, and
the government budget deficit increases by $2 billion.
(a) Calculate the dollar change in government spending. (b)
Calculate the dollar change in public saving. (c) Calculate the
dollar change in private saving. (d) Calculate the dollar change in
national saving. (e) Would the equilibrium real interest rate
increase, decrease, or stay the...
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?
Consider a hypothetical economy with autonomous consumption spending equal to 100 billion dollars, a marginal propensity to consume of 0.8
Consider a hypothetical economy with autonomous consumption spending equal to 100 billion dollars, a marginal propensity to consume of 0.8, private investment spending of 160 billion dollars, government spending of 140 billion dollars, a balanced budget, and balanced trade (i.e. exports and imports are equal). Write a short essay comparing the effects (1) on the government budget and (2) on the equilibrium level of income in the economy of (i) a 5 billion dollar increase in government spending and...
Assume the following economy: Autonomous Consumption = £10,000; Marginal Propensity to Consume = 0.8; Business Investment...
Assume the following economy: Autonomous Consumption = £10,000;
Marginal Propensity to Consume = 0.8; Business Investment = £30,000
A. Find the equilibrium size of income Y and the size of the
Multiplier of Business Investment (hint: to find the Multiplier
increase investment by 10,000) (5%) B. Assume now that a government
sector is introduced, while business investment is still £30,000.
Government spending injects £50,000 into the economy. However, in
order to finance its expenditure the government levies an income
tax...
Assume the following economy: Autonomous Consumption = £10,000; Marginal Propensity to Consume = 0.8; Business Investment...
Assume the following economy: Autonomous Consumption = £10,000;
Marginal Propensity to Consume = 0.8; Business Investment = £30,000
A. Find the equilibrium size of income Y and the size of the
Multiplier of Business Investment (hint: to find the Multiplier
increase investment by 10,000) (5%) B. Assume now that a government
sector is introduced, while business investment is still £30,000.
Government spending injects £50,000 into the economy. However, in
order to finance its expenditure the government levies an income
tax...
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is,...
Consider a hypothetical economy in which the marginal propensity
to consume (MPC) is 0.50. That is, if disposable income increases
by $1, consumption increases by 50¢.
Suppose further that last year disposable income in the economy
was $400 billion and consumption was $300 billion.
On the following graph, use the blue line (circle symbol) to
plot this economy's consumption function based on these data.
01002003004005006007008007006005004003002001000-100CONSUMPTION
(Billions of dollars)DISPOSABLE INCOME (Billions of
dollars)Y-Intercept: 100Slope: 0
From the preceding data, you know...
Consider an economy, but don't know the marginal propensity to consume (MPC) for the average person....
Consider an economy, but don't know the marginal propensity to
consume (MPC) for the average person. If the government decides to
increase its government spending by 1 billion dollars in education
(building more public schools, etc.) To nance the increase in
government spending, the government decides to increase tax by 1
billion dollars as well. How would the GDP respond to this series
of change in the Goods Market Equilibrium? Explain.
If Sally’s consumption function is linear and her marginal propensity to consume is 0.8, this means...
If Sally’s consumption function is linear and her marginal
propensity to consume is 0.8, this means that
Sally’s total spending cannot
exceed 80% of her income.
Sally will spend at least 80%
of her total income.
Sally will not save money
regardless of her income.
Sally will begin to save at
the point where her marginal income is equal to
0.8.
(19)
If a household’s income increases from $50,000 to $60,000, and
as a result, its consumption...
If the marginal propensity to consume in this economy is 0.6, and net export increase by...
If the marginal propensity to consume in this economy is 0.6,
and net export increase by $ 10 billion. Calculate multiplier and
change in real GDP due to multiplier effect. Discuss the
relationship between net export and multiplier. Use proper refences
and citations. I need help with finding citation and reference
Consider a closed economy income-expenditure model of the economy where the country begins in a long-run...
Consider a closed economy income-expenditure model of the
economy where the country begins in a long-run equilibrium. •
Investment (I) and government spending (G) are fixed: I = 41.5, G =
26. • The income tax rate is t = 6.25%, so tax revenue equals T =
tY . • The consumption function is C = 12 + 0.8Yd, where Yd = (1 −
t)Y . For the calculations below, write your answers as either a
fraction or to two...
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