Solve for equilibrium where: • NT = tY = 0.15Y • C = Co + cYD = 20 +0.8YD o lo = 100 o Go = 100 Explain the effect taxes have on the multiplier.
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- TRUE - OR - FALSE Government purchases and income taxes will have the same effect on the multiplier. O True O FalseWe found that for every $1 increase in G there is a multiplied impact on output with, in the most 1 basic model, a multiplier of A study by economists at the New York Fed conducted 1- MPC during the COVID-19 recession found that "as of the end of June 2020, a relatively small share of stimulus payments-ljust] 29 percent-was used for consumption." What is the G multiplier based on that estimated MPC and the formula from the basic model?Figure 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.
- The formula for the government spending multiplier is A) 1/(1+ MPC). B) 1/MPS. O C) 1/MPC. OIf consumption is C=100+0.75Yd Taxes is T=50+0.5Y Export is X=200 Import is M=50+0.25Y Government spending is G=150 Investment is I=200 .Use the multiplier applicable to export,to explain how a100–billion decline in demand for export could affect the economy’s: (i) GDP/income Answer An export multiplier is a multiplier that is applicable to export. The effect of a decline in demand by 100 billion on GDP/income will be computed by the export multiplier. Thus, Export Multiplier=1/(1−MPC+M) =1/(1-0.75+0.5)=1.33 The export multiplier shows that the GDP/income will be decreased by 1.33 billion with the decline in the 100-billion decline in the demand. please show how you get M=0.5When 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
- Moving along the aggregate supply curve, O the real wage rate is constant. O technology advances. O only the price level changes. O the stock of human capital increases. O the quantity of capital used increases.What is the formula for the marginal propensity to expend? A aggregate expenditures/A national income O b. A autonomous expenditures/A national income O a. O c. A consumption/A national income O d. A national income/A induced expendituresQuestion 3 Given the following information: 1= 150, G = 150, T=150 and C = 150 +0.75(Yd) Which of the following is true? Equilibrium Output is 1550 20% is the Marginal Propensity to Consume MPC Tax Multiplier is 3 O None of the Choices O Equilibrium Output is 15 O 20% is the Marginal Propensity to Consume MPC O Tax Multiplier is 3 O At least 2 of the choices t
- how much will a $100 tax cut increase disposable income? How much will it increase consumption? (hint: mpc=.75) Taxes cause income and consumption to fall disposable income will rise by $75 Consumption will rise by $100 consumption and income will rise by $100 consumption will rise by $75 disposable income will rise by $100 O O CWhy does a $1 increase in government purchases lead to more than a $1 increase in income and spending? OA. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to a decrease in induced spending OB. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to a decrease in induced spending OC. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to an increase in induced spending OD. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to an increase in induced spendingSuppose 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%
