Suppose you are an economic adviser to the president, and the economy needs a real GDP increase of $700 billion to reach full- employment equilibrium. If the marginal propensity to consume (MPC) is 0.6 and you are a Keynesian, Congress must increase government spending by $ billion to restore the economy to full employment.
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- Consumers increased consumption by a relatively small amount in 2008 and 2009 because they believed the tax cuts were temporary. True or FalseIn the Keynesian model, if the economy is experiencing a recessionary gap of $825 billion and the marginal propensity to save is .20, which one of the following combinations of spending and taxing changes should the government implement in order to eliminate the gap? 1. Increase government spending by $350 billion and decrease taxes by $350 billion. 2. Decrease government spending by $125 billion and increase taxes by $50 billion. 3. Decrease government spending by $250 billion and increase taxes by $150 billion. 4. Increase government spending by $600 billion and decrease taxes by $225 billion. 5. Increase government spending by $100 billion and decrease taxes by $100 billion. 6. Increase government spending by $125 billion and decrease taxes by $50 billion.According to Keynesian economics, what impact would a balanced budget amendment to the constuition requiring the federal government to balance its budget annually have on the economy?
- According to Keynesian economics, what impact would a balanced budget amendment to the constitution requiring the federal government to balance its budget annually have on the economy?true or false and why The economy is at the Keynesian equilibrium. Assuming that taxes are zero, a decrease in the marginal propensity to consume decreases unplanned inventories in the short run.Please answer the question below: If the current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. increase government spending by P25 billion b. increase government spending by P100 billion c. increase government spending by P20 billion d. decrease government spending by P100 billion If current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. decrease taxes by P100 billion b. increase taxes by P100 billion c. decrease taxes by P25 billion d. increase taxes by P25 billion * the attached photo is just connected to the question *
- Which of the following is an appropriate fiscal policy response if the economy is in a state of rising inflation? Contractionary fiscal policy by decreasing government spending and taxes. Expansionary fiscal policy by increasing government spending and taxes. Contractionary fiscal policy by decreasing government spending and increasing taxes. Expansionary fiscal policy by increasing government spending and lowering taxes.Consider an economy that is operating below the full-employment level of real GDP. What would be the effect of an increase in government spending on aggregate demand and real GDP?Why will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expected
- Consider a Keynesian model but where investment (just like consumption) is increasing in aggregate income, e.g., because investment depends on business cash flow. Now that investment depends on aggregate income, a fiscal stimulus has more effect on equilibrium output.Answer true, false, or uncertain. Please briefly explain your answerConsider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were increased, then Group of answer choices A) The Y = C+S+T line would shift to the right, and equilibrium Y would increase. B) the C+I+G line would shift downward, and equilibrium Y would decrease. C) The Y = C+S+T line would shift to the left, and equilibrium Y would decrease. D) neither of the lines would shift, and equilibrium Y would stay the same. E) the C+I+G line would shift upward, and equilibrium Y would increase.According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the government spending multiplier? Explain the reasoning behind this relationship.