What happens to the tax multiplier

Reference no: EM131004164

1. (Changes in Government Purchases) Assume that government purchases decrease by $10 billion, with other factors held constant. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased autonomous net taxes by $10 billion.

a. 0.9
b. 0.8

c. 0.75
d. 0.6

2. (Fiscal Multipliers) Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?

Reference no: EM131004164

Questions Cloud

For each of the following, compute the present value : For each of the following, compute the present value, (Enter rounded answers as firectedm but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 23.16)

What happens to the price level : Using the aggre- gate demand-aggregate supply model, illustrate an econ- omy with an expansionary gap. If the government is to close the gap by changing government purchases, should it increase or decrease those purchases? In the long run, what ha..

Analyse the leadership of a 21 century : Using relevant theories and models critically evaluate and analyse the leadership of a 21stcentury leader of a (business, government or not-for-profit) organisation. If you were in the position of the leader, what could you do to be a better leade..

What is this press release about : 1. What is this press release about? What is it saying? 2. Why did Capital Relocation Services get the new contract?

What happens to the tax multiplier : Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?

How might timing play role in theory of political business : (Balancing the Federal Budget) Once the huge federal bud- get deficits of the 1980s and the first half of the 1990s turned into budget surpluses, why were policy makers more willing to consider discretionary fiscal policy?

At what rate is the supply changing : If 18000 cartons of eggs are available at the beginning of a certain week and the price is falling at the rate of 8 /carton/week, at what rate is the supply changing?

How can you transfer those behaviors to other situation : How can the nurse assist the patient or family in making decisions about medical care?

Response on the research process : Analyze a research topic that you may have been exposed to (from academic journals only within the field of business-social research). Compare the process from the readings to what you have seen. What's missing and how would they improve on that r..

User Account

All Pages