Suppose that the government decreases its autonomous spending by $100 billion and also decreases its autonomous taxes by $100 billion. How would this affect the economy? Question 2 options: No effect on the level of GDP

Suppose that the government decreases its autonomous spending by $100 billion and also decreases its autonomous taxes by $100 billion. How would this affect the economy? Question 2 options: No effect on the level of GDP

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.6P

See similar textbooks

Related questions

Q: What is the total variable cost in perfectly competetive firms

A: Total cost refers to the cost of production a firm incurs at different levels of output. It consists…

Q: A monopolist with demand curve P=40-Q has costs C=0.5Q2 and MC=Q. Calculate the profits if this firm…

A: Demand curve faced by monopoly: P = 40-QCost curve equation: Marginal cost: In a two-part tariff…

Q: Assume that policy makers in the home country are pursuing a fixed exchange rate regime and that…

A: The aggregate demand represents the total demand for all goods and services produced in an economy…

Q: (b) Provide a table with the nominal GDP for the Bahamas for 2020 and 2021. Using only the nominal…

A: For a particular period, the final value of goods and services produced in an economy is known as…

Q: (Figure: Income and Substitution Effects for Cell Phones and Uber Rides) Use Figure: Income and…

A: The income effect is the effect of income changes on the demand, the effect income has on the demand…

Q: Assume that the gross domestic product is $6,000, personal disposal income is $5, 100, the…

A: There are two types of savings that an economy experiences which include private savings where each…

Q: If the production function is F(K,L)=A∗K0.4L0.6 then the marginal rate of technical subsitution is

A: The objective of the question is to calculate the Marginal Rate of Technical Substitution (MRTS)…

Q: The zone of tolerance refers to the area between customers' expectations regarding their desired…

A: The "zone of tolerance" is a range or area. This zone exists between what customers really want…

Q: If price is set at $11 in the market shown in the graph, consumer surplus will consist of areas:…

A: Consuemr surplus is the difference between the maximum price that the buyer is willing to pay and…

Q: Question 05-Difference between Individual and Government Debt. Three reasons government debt is…

A: Individual debt refers to a the individual's total amount of financial obligations, such as loans,…

Q: in the table below, fill in the missing blanks to complete the summary of the effects of changes in…

A: The demand curve depicts the relationship between the price of a commodity or service and the amount…

Q: Suppose the current administration decides to increase government expenditures as a means of…

A: The government sets policies to stabilize economic activity. The major policies are fiscal and…

Q: You sure it is 12.232 and not 14.232 for period 2?

A: Sift through the process and check for conceptual inaccuracies.

Q: Suppose that real GDP is currently $1.45 trillion, potential GDP is $1.51 trillion, the government…

A: Real Gross Domestic Product (Real GDP) reflects the value of all goods and services produced by an…

Q: Fill in the blanks in the table below. The problem is a "puzzle" so the blanks are not necessarily…

A: In the realm of economics and production, three key concepts play a crucial role in understanding…

Q: (Note: All your answers should be rounded to the nearest hundredth. Example: 12.034 =>12.03, 5.175…

A: Aggregate demand functionP=6-0.2YAggregate supply functionP=1+0.15Y

Q: A government finds itself in the following situation: a government budget deficit of $900; total…

A: The government budget deficit is given as $900.The total domestic savings is given as $2000 and the…

Q: The bank you own has the following balance sheet Reserves Loans Assets OA. You can go to the…

A: The Federal Reserve:It has the responsibility to manage the activities of commercial and financial…

Q: 240- 200 160- 120- 80- 40 Price level (GDP deflator, 2007 = 100) LAS 120 too 10 7 8 9 10 11 Real GDP…

A: Macroeconomic analysis provides a comprehensive picture of the financial status of an economy. It…

Q: A firm's demand curve is Q = 2-0.01P, where Q is measured in millions. The firm's output when…

A: Demand refers to the willingness to pay for a certain good or service that is available in the…

Q: QUESTION 1 Consider an OLG economy where each generation has 20 bananas when young, and 0 bananas…

A: In an economic framework characterized by Overlapping Generations (OLG), individuals undergo various…

Q: A firm has the production function f(x, y) = x1.40y1.9⁹0. This firm has decreasing returns to scale…

A: The production function refers to the mathematical relationship between the output of a firm and the…

Q: 1. A company believes that the demand curve for its products is given by: P = 20 - 0.1Q, for Q≤ 50…

A: A demand curve shows the relationship between the price of a good and the services and the demand…

Q: (Figure: Price and Quantity V) At the profit-maximizing output level, this firm earns a profit of:…

A: In perfect competition, There exists a large number of buyers and sellers. The firm will produce…

Q: gure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At…

A: The total cost is the sum of the total of fixed cost and variable cost.TC = TFC+TVCFixed costs do…

Q: Refer to the board. At a price of $10.00, the total surplus would be a) lower than it would be at…

A: Equilibrium price is the price at which quantity demanded equals quantity supplied and the market…

Q: Consider a bankruptcy game with two risk neutral players where V =$800,000, C1= $300,000 and…

A: The Kalai-Smorodinsky bargaining solution discerns an equitable distribution in negotiations. It…

Q: Canada's government savings bonds pay 2.5% annual real rate of return compounded daily. Professor…

A: Annual real rate of return on savings bond= 2.5 percent compounded daily.Amount of money invested by…

Q: A firm produces its output using the following production function: f(x₁, x₂) = √√√x₁ - 1 + 4x2…

A: The production function is a concept in economics that describes the relationship between inputs…

Q: A project has an initial cost of $150,000. The annual operating cost is $8000 for the first 10 years…

A: The term capitalised cost describes the project's total present value, which takes into account the…

Q: Everett also works in the perfectly competitive manicure industry. The market price is $20 and he…

A: In general terms, cost is the amount paid in order to acquire any resource or service. The main aim…

Q: Canada's government savings bonds pay 2.5% annual real rate of return compounded daily. Professor…

A: Annual real rate of return on savings bond= 2.5 percent compounded daily.Amount of money invested by…

Q: 5. State whether the following are true or false and briefly explain why a. Companies spend billions…

A: Advertisement refers to the spreading of awareness about a good or service on media platforms such…

Q: Figure 6 PRICE LEVEL LRAS QUANTITY OF OUTPUT SRAS SRAS, AD 15. Refer to Figure 6. Starting from…

A: Macroeconomic analysis provides a comprehensive picture of the financial status of an economy. It…

Q: Suppose the exchange rate is 13 pesos for $1. A Mexican family is interested in buying a home in…

A: An exchange rate refers to the value at which one currency can be converted into another currency.…

Q: 2. Mark and Jonathan are going to look for an apartment together. Mark has a reservation price of…

A: In economics, a reservation price, also known as a walk-away price or indifference price, is the…

Q: p1= 16 and p2 = 10. Income is $120. The equation for the budget line is x2 = x1 + 12. Enter your…

A: A budget constraint represents all the combinations of goods and services that a consumer may…

Q: "Water is one thing we all have in common. Water issues are a common thread through most of the…

A: The type of market failure being discussed in the article is negative externality. Negative…

Q: (a) Government survey takers determine that typical family expenditures each month in the year…

A: Inflation refers to the rise in prices of goods, that is when the goods and services become…

Q: Identify a market failure(air pollution or water pollution) in Trinidad and Tobago, identify the…

A: The objective of this question is to identify a market failure in Trinidad and Tobago, classify the…

Q: Please type answers

A: The objective of the question is to calculate the Consumer Price Index (CPI) for the subsequent…

Q: A monopoly is distinguished from a firm operating under any other market structure in the following…

A: One seller or manufacturer controls the entire market in a monopoly. In a monopoly, the supply and…

Q: Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he…

A: Nominal GDP, also known as current-dollar GDP, is the total market value of all final goods and…

Q: Assume a firms production function depends on labour hours (L) only and is given by F(L) = 5L0.8 .…

A: The cost of producing 50 units can be determined by multiplying the number of labor hours required…

Q: Consider an economy described by the following: Ć = $3.5 trillion ī = $1.3 trillion G The expression…

A: The Marginal Product curve is referred to as the MP curve in economics. It displays the increased…

Q: The graph below shows the demand and marginal cost curves for the monopolist Mr. Peanut. a. Draw the…

A: The profit maximizing condition is the point where the marginal revenue equals the marginal cost…

Q: Identify a market failure in Trinidad and Tobago, identify the type of market failure and discuss…

A: The objective of this question is to identify a market failure in Trinidad and Tobago, classify the…

Q: Hi there, I need help solving a problem and am unsure how to go about solving the question. It is a…

A: The Diamond-Dybvig model is a model of bank runs and the role of banks in providing liquidity to…

Q: If the production function is F(K,L) = AKºL¹-ª , then the Marginal Rate of Technical substitution…

A: To determine the Marginal Rate of Technical Substitution (MRTS), we have to determine the partial…

Q: How would you draw a graph when tax on ammunition is imposed on the supplier. Please indicate…

A: Tax incidence:It is a necessary payment that is made to the government for the consumption of goods…

Question

My dear please not hand written. Explanation of the correct option and explanation of the incorrect options.

Suppose that the government decreases its autonomous
spending by $100 billion and also decreases its
autonomous taxes by $100 billion. How would this affect
the economy?
Question 2 options:
No effect on the level of GDP
GDP may rise or fall depending on the size of the mpc
GDP will rise
GDP will fall

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Gross Domestic Product

VIEW

Step 2: Explain the correct option

VIEW

Step 3: Explain the incorrect options

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 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

Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on roads and bridges. What are both the short-term and longâ€”term impacts of such policies on the economy?
What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it?
Potential GDP 450 C+l+G+X-IM) F T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In Figure 11-1, the slope of the expenditures schedule is 0.75, and the govemment wishes to achieve full employment. It should cut spending by 1,000. increase spending by 250. cut taxes by 1,000. cut taxes by 250. increase spending by 1,000. Real Expenditure
Briefly discuss the following concepts iv. Government expenditure multiplierv. Potential output
3@ An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4 billion. The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.
3. Suppose the MPC is 0.8. The government wants to decrease Total Spending by $600. How should it change G to achieve this goal? Show your work?
When the MPC increases: a. the government spending multiplier stays the same b. the government spending multiplier decreases c. the government spending multiplier also increases d. the government spending multiplier could increase or decreases e.depending on whether government spending is increasing or decreasing
If the government wants to expand aggregatedemand, it can _________ government purchases or_________ taxes.a. increase; increaseb. increase; decreasec. decrease; increased. decrease; decrease
d H-50 Home BIU ab Insert Page Layout Online class3 (1).docx - Microsoft Word 10 abc X₂ x Aa A A Font References Mailings Review View CM 24 Paragraph Picture Tools Format AaBbCcDdi AaBbCc AaBbCc Emphasis Heading 1 Heading 2 Styles 10 CA A Change Editing Styles EXERCISES FOR CHAPTER 6 Exercise 6.1 Suppose that in an economy with no government the aggregate expenditure function is: AE = 50+0.75Y. (a) Draw a diagram showing the aggregate expenditure function, and indicate the level of planned expenditure when income is 150. (b) In this same diagram, show what would happen to aggregate expenditure if income increased to 200. (c) What are the levels of autonomous expenditure and induced expenditure at income levels of 150 and 200. (d) In this same diagram show what would happen if autonomous expenditure increased by 20. Exercise 6.2 Suppose the media predicts a deep and persistent economic recession. Households expect their future income and employment prospects to fall. They cut back on…
what is MPC, MPS and spending multiplier?
Suppose that the government allocates $1 billion for new roads. It also raises taxes by $1 billion to keep the deficit from growing. The absolute value of the government purchase multiplier is 3.33 and that of the tax multiplier is 2.33. What is the effect on equilibrium GDP? GDP does not change. ● GDP increases by $ 2.33 billion. GDP increases by $3.33 billion ⒸGDP increases by $1 billion.
Y C I G X $ 100 $ 120 $ 20 $ 30 $ 10 $ 300 $ 300 $ 20 $ 30 - $ 10 $ 500 $ 480 $ 20 $ 30 - $ 30 $ 700 $ 660 $ 20 $ 30 - $ 50 14.If government spending increases by $ 15, what is the new equilibrium level of the real GDP? If government spending increases by $ 15 then to find the new equilibrium I can use the recessionary GAP formula Recessionary GAP = GDP Gap / Spending Multiplier (5) 15 = GDP Gap (5) 5 75 = GDP Gap GDP Gap + Old equilibrium level of the real GDP =…