Suppose the government increases expenditures

Assignment Help Business Economics

Reference no: EM13834872

Suppose the government increases expenditures by 120 billion dollars while increasing taxes by 120 billion dollars, and mpc = 0.8. Assume that there is no crowing out, or acceleration effects. What is the combined effect of these changes on GDP? In other words, by how much the GDP increase, or decrease?

Reference no: EM13834872

Questions Cloud

Explanation of the benefits and limitations of the approach : An explanation of which approach (health-planning or community development) would be most appropriate for the community problem you described as part of your Scholar-Practitioner Project. Justify your choice by providing an explanation of the bene..

Conduct a swot analysis on the case study : Answer provides correct and complete information demonstrating critical thinking: Conduct a SWOT Analysis on the case study company's CSR and business ethics practices

Increasing the promotional budget for a product : Increasing the promotional budget for a product in order to increase awareness is not advisable in the short run under which of the following circumstances?

Affect net exports at any given exchange rate : The rise in the US trade deficit during the 1980s was due largely to the rise in the US budget deficit. On the other hand, the popular press sometimes claims that the increased trade deficit resulted from a decline in the quality of US products relat..

Suppose the government increases expenditures : Suppose the government increases expenditures by 120 billion dollars while increasing taxes by 120 billion dollars, and mpc = 0.8. Assume that there is no crowing out, or acceleration effects. What is the combined effect of these changes on GDP? In o..

In the sense that economists use the word : Which of the following represents investment, in the sense that economists use the word?

Velocity of circulation of a monetary aggregate : Why would you expect the velocity of circulation of a monetary aggregate such as M1 or M2 to rise during periods of high interest rates and to decline during periods of low interest rates?

Potential danger of maintaining rigid interest rate target : Those who advocate that the Fed target monetary aggregates, usually argue that the Fed should not alter its monetary targets in response to temporary changes in macroeconomic conditions, yet those who advocate interest rate targeting never recommend ..

Excessively rapid growth in the money supply : Why might M1 and M2 grow at very different rates during a given year? If excessively rapid growth in the money supply is associated with all inflationary episodes, why do central banks ever allow the money supply to increase so rapidly?

User Account

All Pages