Macroeconomics, economics, Microeconomics

Assignment Help:
A government is currently operating with an annual budget deficit of $40 billion. The government has determined that:
• Every $10 billion reduction in the amount of bonds it issues each year would reduce the market interest rate by 0.1 percentage point.
• Every 0.1 percentage point change in the market interest rate generates a change in planned investment expenditures in the opposite direction equal to $5 billion. The marginal propensity to consume is 0.75.
• To eliminate an inflationary gap and take into account the resulting change in the price level, the government must generate a net leftward shift in the aggregate demand curve equal to $40 billion.
Assuming that there are no direct expenditure offsets to fiscal policy, how much should the government increase taxes? Explain by giving appropriate reasons.

Related Discussions:- Macroeconomics, economics

Graded discussion board, The Case: In Pakistan, sugarcane, wheat, rice and ...

The Case: In Pakistan, sugarcane, wheat, rice and cotton accounted for 90% of the value added in crops and 6% of GDP in the last fiscal year but the average yield of these crops is

Measure the economic growth, (i) How do we measure economic growth and why ...

(i) How do we measure economic growth and why do we need economic growth? (ii) What can governments do to stimulate economic growth and create jobs? (provide some current exampl

Critique on earmarking, Critique on Earmarking Studying the working of...

Critique on Earmarking Studying the working of earmarking in many OECD (organisation of economic  cooperation and development) countries, Potter and Diamond (1999) pointed out

Dumping, Dumping In the international marketing, when an organization ...

Dumping In the international marketing, when an organization charges less for goods than it real cost or less than the organizations charges in its home market. This procedure

Utility functions, can you help me answer an economics question

can you help me answer an economics question

How do we evaluate the value of money, How do we evaluate the value of mone...

How do we evaluate the value of money? Supply and demand verifies the value of a currency. If demand is high, the value rises, and vice versa. Factors that affect supply and de

Growth accounting equations , Normal 0 false false false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Optimal Production Quantity, Wholemark is an Internet order business that s...

Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is $0.50 per card, and the cos

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