Explanation it correctly and details Q)Suppose that economists observe than an increase in government spending of $6 billion raises total demand for goods and services by $16 billion. (a) If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? (b) Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than the initial level? Explain your answer.

Explanation it correctly and details Q)Suppose that economists observe than an increase in government spending of $6 billion raises total demand for goods and services by $16 billion. (a) If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? (b) Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than the initial level? Explain your answer.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 7PA

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Q (C ) . Suppose that economists observe than an increase in government spending of $6 billion raises total demand for goods and services by $16 billion. (a) If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? (b) Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than the initial level? Explain your answer.
3. a) Suppose economists observe that an increase in government spending of 300 crore taka raises the total demand for goods and services to 400 crore taka. If these economists ignore the possibility of crowding out effect, calculate the marginal propensity to consume (MPC)? b) Now suppose economists allow for crowding out. Would their new estimate of the MPC be smaller or larger than your answer to part a, explain.
23) If the marginal propensity to consume (MPC) is 0.8 and if government spending (G) rises by $50 while investment (1) falls by $20, by how much will equilibrium income rise? (Jika kecenderungan mengguna sut (MPC) adalah 0.8 dan jika perbelanjaan kerajaan (G) meningkat sebanyak $50 manakala pelaburan (1) jatuh $20, berapakah kenaikan pendapatan keseimbangan meningkat?) $12 $30 O $120 $150
14. The economy is experiencing a $225 million inflationary gap. If the government 02 decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC=0.9, what magnitude of tax change would be appropriate?
Suppose a closed economy with no government spending which in equilibrium is producing an output and income of 2500. Suppose also that the marginal propensity to consume is 0.80, and that, if at full employment, the economy would produce an output and income of 3900 By how much would the government need to cut taxes (T) to bring the economy to full employment?
Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion.a. If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? b. Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than their initial one? I dont understand question b. Hope you can help me explain it elaborately. Thank you!
Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion. a. If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be? b. Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than their initial one?
1. on basis of the following information. Assume that equilibrium real GDP is $800 billion, potential real GDP is $950 billion, the MPC is .80, and the MPI is .40. a) How much must taxes fall to eliminate the GDP gap? b) If government spending and taxes both change by the same amount, how much must they change to eliminate the recessionary gap? 2. Use the following equations for exercise C= $100 + .8Y I=$200 G= $250 X = $100 - .2Y a) What is the new equilibrium level of real GDP if government spending and taxes both increase by $150?
Suppose initially the marginal propensity to consume in an economy is 0.75 and the tax rate is zero. In order to increase revenue, the government now introduces income tax at the rate of 20 per cent of the income. This change would cause multiplier to * Go up by 60% Go down by 60% O Go up by 37.5% Go down by 37.5%
Suppose the consumption function is C= $400 billion + 0.9 Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with Instructions: Enter your response as a whole number. (a) A $60 billion increase in government purchases? $ billion Instructions: Enter your responses rounded to one decimal place. (b) A $60 billion tax cut? $ billion (c) A $60 billion increase in income transfers? $ billion What will the cumulative AD shift be for (d) The increased government spending? $ billion (e) The tax cut? $ billion
1. If an economy has an MPC of 0.9 what is the multiplier? 2. If an economy has an MPS of 0.2 what is the multiplier? 3. If an economy has an MPC of .08 and the government needs to close a recessionary gap of 20 Billion dollars how much government spending should occur? 4. If an economy has an MPS of .05 and the government needs to close an inflationary gap of 10 Billion dollars how much should government spending decrease?
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…