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DeveioP Window Help 8 44% G) , Mon 10:25 p newconnect.mheducation.com Connect Updates Available Do you want to restart to install the updates now or try tonight? Inbox (3,118) - sukeths@tamu.edu - Texas A&M; University Mail -AS (part 2) and Ch 13 Fiscal Policy Saved Help Save & Exit Submit h of the following MPCs when the government increases its spending by $250 billion. Instructions: Round your answers to one decimal place. a. The marginal propensity to consume (MPc) 0.2. The change in GDP is $ billion. b. The marginal propensity to consume (MPC) 0.5. The change in GDP is $ billion. int c. The marginal propensity to consume (MPC) 0.8. ences The change in GDP is $ billion. d. Comment on the relationship between the MPC and the resulting change in GDP-as the MPC rises, does its effect on GDP increase or decrease? As the MPC rises, its effect on GD (Click to select) stays the same increases decreasesExplanation / Answer
Answer:-When the government increases its spending, the change in gdp is given as-
Change in GDP = Increased spending[1/(1-MPC)
Answer A:- SO when MPC =0.2
Change in GDP = Increased spending[1/(1-MPC) = 250*(1/1-0.2)=250*1.25 =$312.5 billion
Answer B:- SO when MPC =0.5
Change in GDP = Increased spending[1/(1-MPC) = 250*(1/1-0.5)=250*2 =$500 billion
Answer C:- SO when MPC =0.8
Change in GDP = Increased spending[1/(1-MPC) = 250*(1/1-0.8)=250*5 =$1250 billion
Answer D:- MPC rises , its effect on GDP increases
Answer:- Government taxation multiplier = -(MPC*Spending multiplier)
A:- When MPC=0.2, taxation multiplier =1.25
Taxation multiplier =-(0.2*1.25)=-2.5
B:- When MPC=0.5, taxation multiplier =2
Taxation multiplier =-(0.5*2)=-1
C:- When MPC=0.8, taxation multiplier =5
Taxation multiplier =-(0.8*5)=-4
D:- Correct option:- Changes in government spending will have a bigger effect on GDP and income than will changes in tax
Answer:- When the taxes decreases the change in gdp is given as-
A:- When MPC=0.2
Change in GDP = 93.8±0.05
B:- When MPC=0.2
Change in GDP = 375±0.02
C:- When MPC=0.8
Change in GDP = 1500±0.02
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