3. The spending multiplier effect Consider a hypothetical economy. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The spending multiplier for this economy in Suppose investment in this economy increases by $100 billion. The increase in investment will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in investment on the first two rounds of consumption spending and, eventally, on total spending and income

3. The spending multiplier effect Consider a hypothetical economy. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The spending multiplier for this economy in Suppose investment in this economy increases by $100 billion. The increase in investment will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in investment on the first two rounds of consumption spending and, eventally, on total spending and income

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 5.11P

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3. Complete the following chart to calculate the spending and tax multipliers. Spending Multiplier Таx MPC MPS Multiplier 0.05 0.9 0.2 0.75 0.6 0.5 1
If the government 40 M on building a new highway calculate the multiplier and total new income qiven the following. MPC .85 MPS .1 MPC .6 Multiplier 4.8
5. The multiplier effect of a change in government purchases
3. The spending multiplier effect Consider a hypothetical economy. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The spending multiplier for this economy is Suppose investment in this economy decreases by $200 billion. The decrease in investment will lead to a decrease in income, generating a decrease in consumption that decreases income yet again, and so on. Fill in the following table to show the impact of the change in investment on the first two rounds of consumption spending and, eventually, on total spending and income. Change in Investment == -$200 billion First Change in Consumption Second Change in Consumption Total Change in Spending - - $ $ billion billion billion Now consider the impacts of a change in taxes. The tax multiplier in this question will be spending will change by S billion. thus, if taxes decrease by $-100 billion then
Aggregate Expenditures 800 600 400 200 0 15 04 Income Refer to the above graph to answer this question. What is the value of the multiplier in this economy? 200 400 600 800 1000 167 A AE 02 O Cannot be determined.
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.
4. Given this diagram; what is the equilibrium level of income? 5. Given this diagram; what is the level of "autonomous spending"? 6. Given this diagram, what is the simple income multiplier?
3. A fall in the income tax rate will O lower the multiplier and lower equilibrium income. raise the multiplier and lower equilibrium income. lower the multiplier and raise equilibrium income. raise the multiplier and raise equilibrium income.
During 2019, a country reported that its real GDP increased by $3.0 billion. The multiplier for this economy is known to be equal to 10.Which of the following might have caused the increase in real GDP? Question 12Answer a. Exports increased by $0.3 billion. b. Investment decreased by $0.3 billion. c. Exports decreased by $0.3 billion. d. Imports increased by $0.3 billion. e. Government expenditure on goods and services increased by $3 billion.
When 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
QUESTION 8 Which of these is positively related to the size of the multiplier? O a. The marginal propensity to consume O b. The marginal utility of money OC. The marginal tax propensity Od. The marginal propensity to save
6. The multiplier effect Consider a hypothetical economy. Households spend $0.60 of each additional dollar they earn and save the remaining $0.40. The multiplier for this economy is Suppose government purchases, G, in this economy increase by $250 billion. The increase in G will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in G on the first two rounds of consumption spending and, eventually, on national income. Note: Use negative signs if numbers are negative. Change in G = $250 billion First Change in Consumption = $ billion Second Change in Consumption 24 billion Total Change in Income = billion Now consider the impact of a similar change in taxes. The (absolute value) of the tax multiplier in this question will be ; thus, if taxes change by $250 billion, spending will change by $ billion. Based on your results, this Keynesian model predicts that a change…