--%>
Assignment Help - homework help

Changes in equilibrium GDP caused by government

Refer to columns 1 and columns 6 of the tabular data described below. Suppose that all taxes are personal taxes and that government spending does not induce a shift in the private aggregate expenditures schedule. Calculate and describe the changes in equilibrium GDP caused by the addition of government.

 

2365_Incorporate government.png

E

Expert

Verified

The addition of $20 billion of government expenditures and $20 billion of personal taxes raise equilibrium GDP from $350 to $370 billion. The $20 billion rise in G raises equilibrium GDP through $100 billion (= $20 billion x the multiplier of 5); the $20 billion rise in T drop consumption by $16 billion at every level. (= $20 billion x the MPC of .8). This $16 billion decline in turn decreases equilibrium GDP by $80 billion ($16 billion x multiplier of 5).  The overall change from comprising balanced government spending and taxes is $20 billion (= $100 billion - $80 billion).

   Related Questions in Finance Basics

  • Q : Describe most conservative capital

    Describe most conservative type of working capital financing plan a company could implement? clarify. An all equity capital structure would be the most conservative kind of working capital financing plan approach. The more long-term financing

    		•
  • Q : Marketing of hardware stores Normal 0

    Normal 0 false false

    		•
  • Q : Explain Fiscal Committees Fiscal

    Fiscal Committees: The committees of members in every house of the Legislature which review the fiscal impact of proposed legislation, comprising the Budget Bill. Presently, the fiscal committees comprise the Senate Budget and Fiscal

    		•
  • Q : What is Budget Change Proposal Budget

    Budget Change Proposal (BCP): It is a proposal to modify the level of service or funding sources for activities sanctioned by the Legislature, suggest new program activities not presently authorized, or to remove existing programs.

    Q : Define Schedule Schedule : The

    Schedule: The explanation of an appropriation in the Budget Bill or Act, exhibiting its distribution to each of the programs, categories, or therefore projects. OR The supplemen

    		•
  • Q : Describe Form 22 Form 22 : It’s a

    Form 22: It’s a department’s request to transfer money to the Architectural Revolving Fund (example, for building enhancements), reviewed by the Department of Finance.

    		•
  • Q : Slope of the budget line and the

    Consider someone won $15 on a Lotto Canada ticket at the local 7-Eleven & decided to spend all the winnings on bags of peanuts and candy bars. The cost of candy bars is estimated as $.75 and the cost of peanuts is $1.50. Plot the data in this table as a budget li

    		•
  • Q : Generalization Normal 0 false false

    Normal 0 false false

  • Q : Explain the role of a dealer in the OTC

    Normal 0 false false

    		•
  • Q : What are Federal Funds Federal Funds :

    Federal Funds: For legal basis budgeting purposes, categorization of funds into which the money received in trust from an agency of the federal government will be deposited and finished by a state department in accordance with state and/or federal rul

    		•