Calculate effect this equal increase in government purchases

Assignment Help Business Economics
Reference no: EM131170619

The hypothetical economy of Betania is in short-run macro equilibrium with RGDP equal to $5 trillion. Assume the MPC in this economy is .9. Suppose the government in Betania increases its purchases by $100 billion and finances this increase in spending by raising taxes by $100 billion.

Using an AS/AD graph, show the impact of this fiscal policy.

Explain what effects (if any) this equal increase in government purchase and taxes would have on price level and employment

Calculate the effect (if any) this equal increase in government purchases and taxes would have on RGDP.

Reference no: EM131170619

Questions Cloud

Consumers and producers surplus : Find the consumers’ surplus at a price level of p = $15 for the price demand equation p = D(x) = (7500 - 30x)/(300-x). Graph the price demand equation and the price level equation p = $15. What region represents the consumers’ surplus?
Federal reserve is great source for economic data : The US government and the Federal Reserve is a great source for economic data. The Federal Reserve site below will allow you to create graphs using data from the government. Create a chart that includes a measure of money such as M1 or M2, consumer p..
What is the estimated cost of construction : A Petroleum company recently completed construction on a large refinery in Louisiana. The final construction cost was $71,000,000. The refinery covers a total of 260 acres. If the power-sizing exponent for this type of facility is .70, what is the es..
Assume upfront costs and insurance under both loan options : You expect to live in a house you are planning to own for 5 years, with a $300K loan. You could get a 3/1 ARM amortized over 15 years at 3.9 % or a fixed 15 year loan at 5.0%. Assume the upfront costs and insurance under both loan options are the sam..
Calculate effect this equal increase in government purchases : The hypothetical economy of Betania is in short-run macro equilibrium with RGDP equal to $5 trillion. Assume the MPC in this economy is .9. Suppose the government in Betania increases its purchases by $100 billion and finances this increase in spendi..
Short-run effect of this increase in new home sales : Suppose the economy is in long-run equilibrium when a decrease in the interest rates causes an increase in new home sales. What happens to the price level and the level of output in the long run? Draw an aggregate demand/supply diagram that illustrat..

Reviews

Write a Review

Business Economics Questions & Answers

  Energy efficiency the same thing as economic efficiency

Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of gasoline. They estimated that in mass production the car would cost $40,000 per unit to build. The engineers argued that Con..

  What constrains its choice of a price

A monopoly firm is free to charge any price it wishes. What constrains its choice of a price?

  Compute the equilibrium wage and capital return

Consider and economy with the following production technology: Y = 9K1/3 L2/3 , where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Compute the equilibrium wage and capital return. b) Compute total p..

  What is the internal rate of return on your investment

Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return on your investment?

  Q1 please construct a 150-2000 word response to the

q1. please construct a 150-2000 word response to the following topicquestions as it relates to the recent atampt and

  How is the comparison for the integrated system

where α is the market potential, e is the advertisement “effort”, and γ is its marginal impact on sales. The cost function for the effort is represented by (1/2)ke2 where k is a constant. Find the Stackelberg equilibria for the following two scenario..

  What about breakdown of existing agreements

This assumption implies that armed conflict can be a necessary prelude to a negotiated settlement of a newly arisen dispute. What about breakdown of existing agreements to settle territorial disputes peacefully.

  If policy change increases social welfare

For each of the following, identify whether the statement is true, false or uncertain and justify your answer. If everyone has the same marginal rate of substitution, then the allocation is Pareto efficient. b) If a policy change increases social wel..

  Annual interest rate compounded monthly

A motorcycle is for sale for $2600. The dealer is willing to sell it with no down payment; pay $44 at the end of each of the first 4 months; and then pay $84 at the end of each month after that until the loan has been paid off. At a 12% annual intere..

  Economic problems for practice

In an article about the financial issues of USA Today, a major magazine reported that the newspaper was losing about $20 million a year. A financial analyst said that the paper should raise its price from 50 cents to 75 cents,

  What is the marginal cost per bushel of apples produced

What is the marginal cost per bushel of apples produced? If the market price of a bushel of apples is $5.50, and is unaffected by the farmer’s production decision, then the marginal revenue of a bushel of apples is $5.50. In that case, how many bushe..

  What qualities make a future issue trigger

Due to the changing environment and external triggers, contingency planning is necessary. What qualities make a future issue a trigger? Consider you are on the strategic planning team for a soft drink company. Here is your company’s future trigger: m..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd