Effect on gdp, International Economics

Assignment Help:

The recessionary gap in a country is $1 trillion. The spending multiplier is 5. For every $50 billion borrowed, interest rates increase by 0.1 %. For every 0.1% increase in interest rates, investment spending drops by $10 billion. How much should the government spend to bring the economy back to full employment? (Hint: the government must account for the crowding out effect. The fall in investment spending is also subject to the multiplier effect. For example, if investment falls by $10 billion, real GDP will fall by 5 x $10 billion = $50 billion.)

The multiplier in a country is 3. What will be the effect on real GDP if the government cuts taxes by $100 billion if there is no Ricardian equivalence in this society? (Assume there are no distortionary effects from the tax) What will be the effect on real GDP if there is a strong Ricardian equivalence effect?


Related Discussions:- Effect on gdp

Globalization, Globalization The procedure of interlinking financial ma...

Globalization The procedure of interlinking financial markets in various countries into a common, world pool of funds to be accessed by both between borrowers  and lenders. It

Exchange rate determination, Q. Describe the chain of events leading to exc...

Q. Describe the chain of events leading to exchange rate determination for the following cases: 1. An increase in the U.S money supply 2. An increase in the growth rate of the

Open international market, Q. The U.S. is most probably the most open inte...

Q. The U.S. is most probably the most open international market among the industrialized countries. What then does the U.S. have to took by joining the WTO? Answer: There ar

Can currency boards make fixed exchange rates credible, Q. Based on the cas...

Q. Based on the case study, answer the following question: Can currency boards make fixed exchange rates credible? Answer: No for the reason that is prohibited by law from a

How much steel will the monopolist sell, Q . Now the monopolist discovers ...

Q . Now the monopolist discovers that it will export as much as it likes of its steel at the world price of $5/ton. It will thus expand for- export production up to the point whe

Relative capital abundance, Q . Consider that the relative capital abundanc...

Q . Consider that the relative capital abundance of Australia was so much greater than that of Sri-Lanka, that we would have to locate Australia far to the right on the K/L axis.

Opportunity cost thory, what is opportunity cost thory explain it with exam...

what is opportunity cost thory explain it with example

What are the main functions of money, Q. What are the main function...

Q. What are the main functions of money? Answer: Money serves generally three important functions that are a unit of account, a medium of exchange and a store of value.

What is the national income identity for a closed economy, Q. What is the ...

Q. What is the national income identity for a closed economy? Answer: Y = C + I + G.

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