Monday
December 22, 2014

Homework Help: Economics

Posted by Ryan on Wednesday, January 31, 2007 at 5:53pm.

it is felt gdp needs to increase by 700 in order to reach a full employment level by how much must government change taxes if they intend to increase spending on national defence by 120? they feel that the MPC in the country is .9 and they want to close the recessionary gap.

I presume you are in a basic economics course, where basic and simple multiplier concepts are presented. (As you advance in econ, the analysis and answered become much more complicated.

The government spending multiplier is 1/MPS = 1/(1-MPC) = 1/.1 = 10
So, increases in national defense by 120 will raise gnp by 1200.

Now then, the tax multiplier is the government multiplier less 1. In this example tax multiplier is 9. So, raising taxes by 55.55 leads to a drop in gnp by 500.

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Economics - 1) If C = 1000 + 7/8[GDP-1000], I = 700 and G = 1000 and the economy...
economic - 1. If C = 1000 + 7/8[GDP-1000], I = 700 and G = 1000 and the economy ...
ECON - If C = 500 + 3/4[GDP- 100], I = 300, G = 400, Xn =- 10 and full ...
Economics - If a government raises its expenditures by $50 billion and at the ...
Economics - Explain how it's possible for actual GDP to temporarily exceed full-...
Economics - GDP=375 Government spending increases by 50 Taxes increase by 50 MPC...
Macroeconomics - Wondering if I am doing this correctly?? If net taxes are ...
Economics - If the government wishes to increase the level of real GDP, it might...
economics - Which combination of fiscal policy actions would be most stimulative...
macroeconomics - which combinations of fiscal policy actions would most likely ...

Search
Members