Macroeconomics, economics, Microeconomics

Assignment Help:
A government is currently operating with an annual budget deficit of $40 billion. The government has determined that:
• Every $10 billion reduction in the amount of bonds it issues each year would reduce the market interest rate by 0.1 percentage point.
• Every 0.1 percentage point change in the market interest rate generates a change in planned investment expenditures in the opposite direction equal to $5 billion. The marginal propensity to consume is 0.75.
• To eliminate an inflationary gap and take into account the resulting change in the price level, the government must generate a net leftward shift in the aggregate demand curve equal to $40 billion.
Assuming that there are no direct expenditure offsets to fiscal policy, how much should the government increase taxes? Explain by giving appropriate reasons.

Related Discussions:- Macroeconomics, economics

Rent, quasi rent theory

quasi rent theory

Boltzmann distribution, Boltzmann Distribution: In most cases of interest o...

Boltzmann Distribution: In most cases of interest of chemistry the particles adopt the Boltzmann distribution. Qualitative considerations: the general expression for W given by eq

What is the difference between scarcity and shortage, What is the differenc...

What is the difference between 'scarcity' and 'shortage'?  'Scarcity' and 'shortage' have dissimilar definitions. In reality, when most of the goods and resources are scarce go

Primary inputs, Normal 0 false false false EN-IN X-NO...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Explain fiscal policy, Fiscal Policy Fiscal policy refers to the manage...

Fiscal Policy Fiscal policy refers to the management of government spending and tax policies to influence total desired spending so as to achieve the desired level of economic

Market Demand, Ask quesThe market demand for brand X has been estimated as ...

Ask quesThe market demand for brand X has been estimated as Qx = 1,500 - 3Px - 0.05I - 2.5Py + 7.5Pz where Px is the price of brand X, I is per-capita income, Py is the price of

What is derived demand, The demand for every productive resources is a deri...

The demand for every productive resources is a derived demand.  By derived demand it is meant that it is the output of the resource and not the resource itself for which is a deman

Evaluation of the wto, Evaluation of the WTO: The WTO is different fro...

Evaluation of the WTO: The WTO is different from and an improvement over the GATT in the following respects:  •  The WTO is more global in its membership.  •  The WTO ha

Write Your Message!

Captcha
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