What is the multiplier for government spending

Reference no: EM13225154

Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y - T). Planned investment is 300, as are government spending and taxes.

a. If Y is 1,500, what is planned spending? What is inventory accumulation or decumulation? Should equilibrium Y be higher or lower than 1,500?

b. What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the

equation Y = C + I + G and then solve for Y.)

c. What are equilibrium consumption, private saving, public saving, and national saving?

d. How much does equilibrium income decrease when G is reduced to 200? What is the multiplier for government spending?

Reference no: EM13225154

Questions Cloud

What is the unemployment rate among surveyed people : Of the 50 not working, 10 were full-time college students, 18 were retired, 5 were under 16 years of age, 7 had stopped looking for work because they believed there were no jobs for them, and 10 were actively looking for work.

Explain hydrogen fluoride is a highly reactive gas : Hydrogen fluoride is a highly reactive gas. It has many industrial uses, but the most familiar property of HF is its ability to react with glass. As a result, HF is used to etch glass and frost the inner surfaces of light bulbs

Determine the after-tax rate of return on the investment : Uncle Elmo is contemplating a $10,000 investment in a methane gas generator. He estimates his gross income would be $2000 the first year and increase by $200 each year over the next 10years. His expenses of $200 the first year would increase.

Explain net ionic equations for the formation : When potassium carbonate is added to the remaining solution, a precipitate occurs. Which ions were present in the original solution? Write net ionic equations for the formation of each of the precipitates observed.

What is the multiplier for government spending : Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y - T). Planned investment is 300, as are government spending and taxes. a. If Y is 1,500, what is planned spending

State ionic and net ionic equations : Write ionic and net ionic equations to show how limestone reacts with HNO3 and H2SO4 to neutralize them. How would you be able to tell if the neutralization process was working

What is the short-run impact on prices and output : An economy is initially in long-run equilibrium. The introduction of an electronic payments system dramatically reduces the demand for money in the economy. a. What is the short-run impact on prices and output of the new system

Explain what volume of a concentrated hcl solution : What volume of a concentrated HCl solution, which is 36.0% HCl by mass and has a density of 1.179g/mL , should be used to make 4.95 L of an HCl solution with a ph of 1.5?

What are alternative approaches to measuring poverty : A) What are alternative approaches to measuring poverty and inequality B) Describe the long-term trends in inequality in the United States using the available measures C) What are possible explanations for these long-term trends.

User Account

All Pages