Reference no: EM13986841
The government wants to run expansionary fiscal policy (deficit spending) to achieve full employment. For this purpose, the government wants to provide each unemployed person with a low wage job.
There are currently 10 million unemployed people in the US. On average, an American fulltime employee works 1,700 hours annually. For a low wage job, the average output per hour is $12, and the average wage per hour worked is $10. The propensity to consume (the fraction of income consumed) is 0.95 on average. Using: (Change in N) · ( y-c·w)= Change in B,
Calculate the amount of additional deficit spending (in billions) by the government that is required to achieve it.
HINT: First calculate the required hours of employment that the government needs to create, and interpret this as the change in the hours of employment that needs to be achieved by deficit spending. Use the remaining information and the formula to determine the additional amount of deficit spending required.
You will calculate with big numbers so make sure to keep track of all the zeros. The use of Excel is recommended. To arrive at your answer in billions, divide the result you get for the Change in B by 1000000000.
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