Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t-1/3. What change in government purchases would lead to an increase in national income of 500? Select one: a. 50 b. 200 C. 500 d. 100 e. 300 O O O O

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t-1/3. What change in government purchases would lead to an increase in national income of 500? Select one: a. 50 b. 200 C. 500 d. 100 e. 300 O O O O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Refer to the graph for the health care market. A health insurance plan that pays four-fifths of the…

A: Insurance:It is a contract in which a person buys insurance from the company and pays the premium…

Q: Vodacom's Price Strategy High Price Low Price High Price Vodacom +R200 MTN+R200 Vodacom-R100 MTN…

A: In the context of game theory, equilibrium outcome or the Nash equilibrium is the point of a game…

Q: True or False and explain the math In the market for widgets, there are 200 firms which each have a…

A: To determine if the statement is true or false, we need to analyze the aggregate supply function of…

Q: 1. Consider the following equations for a small open economy for both the goods and money markets.…

A: The IS-LM model is an economic framework that represents the interaction between the real and…

Q: In order to hire additional laborers, a monopsony must A. do nothing. B. advertise for the labor.…

A: A monopsony market is a market structure characterized by a single buyer facing many sellers. This…

Q: a) Explain how real interest rate affects net exports b) A friend from the U.S. visited Ghana and…

A: a) Explanation of how real interest rate affects net exports:Real interest rate is the nominal…

Q: 0.5 0.5 Given a production function: Y = AK N If output grows at 5%, capital grows at 2% and the…

A: Production function: Y = AK0.5N0.5where Y is output; A is technology (or total factor productivity),…

Q: During the recession of 2007-2009 in the United States, relative to potential GDP. Select one: O a.…

A: A recession refers to a significant decline in economic activity within a country or region. It's…

Q: 22. Refer to above figure, which of the following statements is false?

A: An indifference curve shows the combination of two goods which derives the same level of utility to…

Q: Germany and Belgium use the exact same currency, why would real exchange rates be different?

A: A government will usually issue and control currency, which is used as a means of exchange to…

Q: How do I graph this please? In the graph below, use the line tool to draw the market demand curve…

A: Market demand refers to the total quantity of commodities that all consumers in a specific market…

Q: Scenario: The following figure shows the private cost and social cost of producing Good X. Firm A is…

A: The firm produces a specific quantity of goods that are utilized by common people. The good itself…

Q: 1. The diagram below illustrates a decrease in the long-run supply of a commodity. To the right of…

A: Quantity supplied refers to the specific quantity of the commodity that the producer sells at a…

Q: Econoline Company produces only two goods and they operate with limited resources. The production…

A: A graphical depiction known as the Production Possibility Frontier illustrates the highest possible…

Q: Suppose the graph represent demand and marginal cost for a firm that is able to engage in perfect…

A: In a perfectly price discriminating market all the sellers have the knowledge regarding the consumer…

Q: Suppose that currency in circulation is $800 billion, the amount of checkable deposits is $1200…

A: The objective of the question is to understand the impact of an open market purchase by the central…

Q: What might be a set of favorable terms of trade for the two countries?

A: This can be described as the ratio at which a country can exchange its exports for imports. It…

Q: Suppose that Paulie and Vinny can each produce ice cream or t-shirts. The table shows the quantity…

A: Comparative advantage refers to an ability of providing a product or service at a lower opportunity…

Q: Suppose a science museum charges $15 for admission, and each day 200 adults visit the museum.…

A: The museum charges $15 for admission Every day 200 adults visit the museum. For every $1000 spent on…

Q: What happens if there is a shortage or a surplus of Canadian dollars in the foreigh exchange market?…

A: The foreign exchange market shows the equilibrium exchange rate and the equilibrium quantity of…

Q: Suppose that the government of Smallville spends $2 trillion in 2020 and receives tax revenues of…

A: The government spends a specific amount for which they expect a suitable return. However, there…

Q: Please give me answer with detail explanation

A: The question is asking us to determine which change in the production of Good Y involves the largest…

Q: 3. Show the impact of the Fed's sale of government securities on the economy using the followin…

A: A model used in macroeconomics is the (AD/AS) model. It clarifies how an economy's price level and…

Q: The natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a ear. raw…

A: Inflation is based on connected to the increment in price levels. Positive rate inflation is implied…

Q: on age What is generally true of consumers in a recession? a. The rich suffer as the poor cut back…

A: A recession is an economic downturn described by a critical and sustained decrease in economic…

Q: Owen saw that the price of peaches had gone down, and so he decided to buy more peaches. Based on…

A: The correct answer is:B) Owen's quantity demanded for peaches has increased.Here's why:The passage…

Q: Price (per unit) C 8 0 0 0 Quantity (units of output) QA and charge PA OQ and charge PB. O Q8 and…

A: A natural monopoly arises when there are high barriers for the new entrants and huge start-up costs…

Q: "Intel CEO Pat Gelsinger is putting the pressure on the U.S. government to help subsidize chip…

A: The concepts of increase in demand and supply of a good are fundamental in economics and are often…

Q: An agreement to fix prices is a violation of antitrust laws. O True False

A: Antitrust laws are regulations that encourage competition by limiting the market power of any…

Q: Price Level PP AD₁ AD₂ AS

A: Aggregate demand refers to the overall quantity of goods or services that an economy demand over a…

Q: The graph shows the cost curves and the marginal revenue curve of an individual corn farmer at…

A: Producer's equilibrium is a situation when a producer earns the maximum possible profit for a given…

Q: Colombia can produce 3 tons of cocoa beans or 6 tons of coffee per day. Ghana can produce 10 tons of…

A: Absolute advantage and comparative advantage are concepts in international trade theory that help…

Q: a) Use the information in the table to graph supply & demand curves. Show Consumer Surplus and…

A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Q: The 2010 Deep Water Horizon oil spill in the Gulf of Mexico caused the tourism industry to lose $2…

A: Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and…

Q: The distinctive characteristic of a progressive tax is that the dollars paid in taxes rise as income…

A: Tax is a necessary fees or amount that is collected by the government from the public. The amount of…

Q: For development, economists consider a set of 1. Resources 2. Responsibilities 3. Goals 4. More than…

A: For development, economists consider a set of:more than one of the above.Development is a…

Q: A company that manufactures pulse Doppler insertion flow meters uses the Straight Line method for…

A: Depreciation is the allocation of the cost of a tangible asset over its useful life. In other words,…

Q: Price ($) 40 36 32 28 24 20 16 12 00 4 0 4 8 12 16 20 24 28 32 36 40 Quantity per period a. If the…

A: Elasticity measures the percentage change in quantity due to percentage change in price. The price…

Q: Two alternatives are being considered for a water resources project. Alternative A has a project…

A: Given: A has a project lifetime of 40 YearsB has a project lifetime of 30 YearsInterest rate = 8%…

Q: Consider a two-period resource allocation model where the efficient allocation implies undiscounted…

A: Efficient allocation by its name denotes that the allocation of goods is accurate and generates…

Q: John runs a small bakery in his neighbourhood, John's Delightful Bakery. He bakes a variety of…

A: Explicit cost is the actual monetary expenditure incurred to run a business. Implicit cost is the…

Q: What potential benefits could coffee bean farmers, farmhands and villages experience if an online…

A: The objective of the question is to understand the potential benefits that coffee bean farmers,…

Q: If the price level is 100 for 2019 and the price level is 108.5 in 2020, a nominal GDP in 2020 of…

A: Nominal GDP : Nominal Gross Domestic Product is the total market value of all goods and services…

Q: Suppose Larry's Lariats produces 25,000 lassos and sells each for $10. What is the company's total…

A: Total Revenue is the total earnings that the producer earns from the sale of the output that is…

Q: a) Explain how real interest rate affects net exports b) A friend from the U.S. visited Ghana and…

A: a) The real interest rate affects net exports through its impact on the exchange rate. When the real…

Q: Value of Marginal Product Labor 1 2 3 4 5 6 Marginal Product of Labor 10 8 7 5 3 1 Price of Product…

A: The marginal product:The marginal product (MP) is defined as the increase in the firm's total output…

Q: on The following graph shows the average and marginal revenue curves for a monopolist: Revenues $600…

A: A price-maker is a monopoly. There are no rivals in a market that is monopolistic. Being the only…

Q: The table shows the amounts held as the various components of M1 and M2. Item Non-chequable…

A: The supply of money includes the circulation of currency, demand deposits and other deposits of…

Q: The graph shows an economy that is above full employment. To restore full employment, the government…

A: The full employment equilibrium is the long run condition in an economy where aggregate supply…

Q: Which countries discount value of dollar?

A: An exchange rate is the price of one currency in terms of another currency. It represents the rate…

Question

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.
What change in government purchases would lead to an increase in national income of 500?
Select one:
a. 50
b. 200
c. 500
d. 100
e. 300
O
O
O

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Fiscal multiplier and it's use as a policy instrument.

VIEW

Step 2: Calculate the change in government income required for national income increase of 500.

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

If, Autonomous Private Final Consumption Expenditure = $ 13,500, Exports = $ 5000 Government Final Consumption Expenditure = $ 6800 Government Investment Expenditure = $ 8900 Marginal Propensity to Import = 0.1, Marginal Propensity to Save = 0.25, Tax rate = 20% If Government increases its Investment Expenditure by $ 12,000, what is Marginal Propensity to Consume?
C = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%.
A. Suppose the country of Freelandia has an MPC of .85 and a real GDP of $200 billion. If its investment spending decreases by $3 billion, what will be its new level of real GDP?
If taxes are increased, will most people save more or less than before? Does national saving rise or fall? Explain.
Is is possible for federal investment to have a negative rate of return? Yes, if the spending results in a strong crowding-out effect or if state and local governments substitute towards federal investment by reducing stateand local investment. Either would potentially reduce future productivity and output (GDP), resulting in a negative return. Yes, if the spending results in a weak crowding-out effect or if state and local investments complement the increase in federal investment by. Either would potentially reduce future productivity and output (GDP) and hence result in a negative return. No. At worst, federal investment can have no future return as the expenditure offered some form of service (ex. jobs training) or useful infrastructure (ex. highways). No. If in the future there were a negative return, the federal government would increase expenditures again to offset it.
Level of investment goes up by 200. What happens with the level of GDP if you know that MPC = 0,8 and net tax %3D rate = 0.1?
C = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
If the MPC equals 0.5, and real GDP is $14 trillion with potential real GDP $14.5 trillion, how much would governmentpurchases would need to increase by to restore the economy to potential real GDP?
Typically we might expect higher government spending to crowd out private invest- explain the rationale for this expected relationship. ment.
3. If C = 1,500+ 0.60Y and T = 50, what is the after-tax consumption function? a.C= 1470+ 0.4Y www b.C 1470 +0.6Y www = C.C 1500+ 0.6Y www. = d.C 1530 +0.6Y www =
Suppose there is a simultaneous increase in government spending (fiscal policy) and autonomous consumption, what would happen to consumption C. tax generation T and national income Y? C+ BT-bY = Co T-tY To -C+Y = Io + Go (National Income Equation) (Consumption Function) (Income-Dependent Tax)
V1 Consider the following information for a country: Consumption function: C = 85+0.8Yd Investment function: l = 85 Government spending: G=60 Net taxes: T = -40+0.25Y Disposable Income: Yd = Y - T Equilibrium: Y = C + l + G The level of equilibrium income, Y, = $_____(Enter response rounded two decimal places) The government collects net taxes of $_____ Remember the budget surplus is equal to taxes minus government spending, The governments budget surplus is $____