-University of Missou -> c Dwww.saplinglearning.com/ib.scms/mod/ibis/view.php?id
ID: 1207455 • Letter: #
Question
-University of Missou -> c Dwww.saplinglearning.com/ib.scms/mod/ibis/view.php?id=2543995 uestion 12 of 12 Due Date: Points Possible: Grade Category: Description: Review Chapter 1 Map sapling learning Suppose Kittyville's full-employment GDP - $600 billion, and the current equilibrium GDP- $400 billion The MPC in this economy 0.90 ldentify the type of expenditure gap in Kittyville's economy: Policies: To correct this gap, Kittyville hires an economist, Kittyzen Keynes, who suggests: Decreasing Recessionary Increasing Inflationary You can check you government spending or You can view solu taxes You have two atte Suppose Kittyville decides to change government spending under Keynes' advice. By how much must government spending change to correct for the expenditure gap (rounded to nearest billion dollars)? You lose 10% of t answer in your q attempt at that ar For multiple-choi depends on the n Number Billion Dollars Suppose Kittyville instead decides to change taxes under Keynes advice. By how much must taxes change to correct for the expenditure gap (rounded to nearest billion dollars)? eTextbook Number Help With This Billion Dollars Ask me anything 7:09 PM 4/28/2016Explanation / Answer
Answer 1:
Since the current GDP is less than the potential GDP, the gap is recessionary.
Answer 2:
Increasing government spending
Answer 3:
Reducing taxes
Answer 4;
MPC = 0.90
Government spending multiplier = 1 / 1- MPC = 1/ 1-.90 = 10
Change in income required = Potential GDP - Current GDP = 600 - 400 = $200
Change in government spending = Change in income required / Multiplier = 200 / 10 = $ 20 million ( Answer )
Answer 5:
tax multiplier = MPC / 1 - MPC = 9
Change in Taxes required = Change in Income / Multiplier = 200 / 9 = $22.22 million.
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