Question

An increase in government purchases of goods and services that is financed by current taxes leads to propensity to consume, the stated policy change leads to a change in desired national saving. In an economy where consumers have a higher marginal 

          An increase in government purchases of goods and services that is financed by current taxes leads to 
propensity to consume, the stated policy change leads to a change in desired national saving. In an economy where consumers have a higher marginal
Show more…
An increase in government purchases of goods and services that is financed by current taxes leads to propensity to consume, the stated policy change leads to a change in desired national saving. In an economy where consumers have a higher marginal

Added by Julia O.

Close

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
AceChat toggle button
Close icon
Ace pointing down

Please give Ace some feedback

Your feedback will help us improve your experience

Thumb up icon Thumb down icon
Thanks for your feedback!
Profile picture
An increase in government purchases of goods and services that is financed by current taxes leads to a decrease in desired national saving. In an economy where consumers have a higher marginal propensity to consume, the stated policy change leads to a decrease in desired national saving.
Close icon
Play audio
Feedback
Powered by NumerAI
Kathleen Carty Ivan Kochetkov
Jennifer Stoner verified

Akash M and 98 other subject Microeconomics educators are ready to help you.

Ask a new question
*

Labs

-

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs
*

Key Concepts

-
Key Concept
Premium Feature
Explore the core concept behind this problem.
Play button
Key Concept
Premium Feature
Explore the core concept behind this problem.
Your browser does not support the video tag.
*

Recommended Videos

-
suppose-the-government-in-this-economy-decides-to-decrease-government-purchases-by-300-billion-the-decrease-in-government-purchases-will-lead-to-a-decrease-in-income-generating-an-initial-ch-46326

Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to . This decreases income yet again, causing a second change in consumption equal to . The total change in demand resulting from the initial change in government spending is .

Akash M.
2-the-multiplier-effect-of-change-in-government-purchases-consider-hypothetical-closed-economy-in-which-households-spend-070-of-each-additional-dollar-they-earn-and-save-the-remaining-030_-t-07926

'2. The multiplier effect of . change in government purchases Consider hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30_ The marginal propensity to consume (MPC) for this economy is and the spending multiplier for this economy is Suppose the government in this economy decides to decrease government purchases by $300 billion_ The decrease in government purchases will lead to decrease in income generating an initial change in consumption equal This decreases income yet again_ causing second change in consumption equal to The total change in demand resulting from the initial change in government spending is'

Lottie A.
the-government-can-use-________-in-the-form-of-________-to-increase-the-level-of-aggregate-demand-in-the-economy-a-contractionary-fiscal-policy-a-reduction-in-taxes-an-expansionary-fiscal-po-70368

The government can use fiscal policy in the form of either a contractionary fiscal policy, which involves a reduction in taxes, or an expansionary fiscal policy, which involves an increase in government spending, to increase the level of aggregate demand in the economy.

Haricharan G.
*

Recommended Textbooks

-
Principles of Economics

Principles of Economics

Gregory Mankiw 8th Edition
achievement 1,895 solutions
Principles of Microeconomics for AP® Courses

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy Taylor 2nd Edition
achievement 1,953 solutions
Economics

Economics

Michael Parkin 12th Edition
achievement 1,575 solutions
*

Transcript

-
00:01 Hello students, so mpc is marginal propensity to consume.
00:17 Gdp is gross domestic product.
00:29 Assuming mpc is 75 % that is 0 .75.
00:40 Initial decrease in government purchases is 300 billion dollars.
00:49 Initial change in consumption that is mpc multiplied by change in government purchases which is 225 billion dollars...
Need help? Use Ace
Ace is your personal tutor. It breaks down any question with clear steps so you can learn.
Start Using Ace
Ace is your personal tutor for learning
Step-by-step explanations
Instant summaries
Summarize YouTube videos
Understand textbook images or PDFs
Study tools like quizzes and flashcards
Listen to your notes as a podcast
Continue solving this problem
Create a free account to:
  • View full step-by-step solution
  • Ask follow-up questions with Ace AI
  • Save progress and study later
Continue Free
Join the community

18,000,000+

Students on Numerade

Trusted by students at 8,000+ universities

Numerade

Get step-by-step video solution
from top educators

Continue with Clever
or



By creating an account, you agree to the Terms of Service and Privacy Policy
Already have an account? Log In

A free answer
just for you

Watch the video solution with this free unlock.

Numerade

Log in to watch this video
...and 100,000,000 more!


EMAIL

PASSWORD

OR
Continue with Clever