MACROECONOMICS 3. (a) Assuming that the MPC for the US is 0.90, what will be the output effect if the US government spends $700b without any leakage? (5 Points). (b) How will your answer change if the government gives a $700b tax cut instead? (NB: You must use the Keynesian multipliers) (5 Points) (c) Briefly explain why fiscal and monetary policies affect business decisions (5 Points). You may use the Keynesian
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90, this means that for every additional dollar of income, individuals will spend 90 cents and save 10 cents. If the US government spends $700 billion without any leakage, this will increase the aggregate demand in the economy. The Keynesian multiplier can be Show more…
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1) Assume that taxes depend on income. The MPC is 0.8 and t is 0.25. The government spending multiplier is A) 1.67. B) 2.5. C) 5. D) 10 2) If taxes depend on income and the MPC is 0.6 and t is 0.3, the tax multiplier is A) -1.03. B) -1.72. C) -2.0. D) -2.24 3) Assume that taxes depend on income. The MPC is 0.8 and t is 0.4. If government purchases increase by $100 billion, the equilibrium level of output will increase by A) $16.7 billion. B) $57.5 billion. C) $192.31 billion. D) $215.9 billion.
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'1. Use the Keynesian cross model to predict the impact on equilibrium GDP of the following In each case; State the direction of the change and give & formula for the size of the impact: a. An increase in government purchases b. An increase in taxes c. Equal-sized increases in both government purchases and taxes'
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9. Answer the following macroeconomics questions. i. What is the difference between nominal GDP and real GDP? Which one of them is used to calculate the economic growth rate? Justify your answer. ii. Give the equation used to calculate the unemployment rate. State the different types of unemployment. In your opinion, which type is the most problematic one? Justify your answer. iii. Governments may achieve certain economic goals, such as controlling inflation or boosting economic growth, by implementing fiscal and/or monetary policies. Briefly explain the difference between fiscal and monetary policies.
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