Assume the tax multiplier is estimated to be 1.3 and the aggregate supply curve has its usual upward slope. Suppose the government lowers taxes by $75 million. Aggregate demand will by $ million. (Enter your response rounded to one decimal place.)
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- consumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe the tax cuts temporary. true or falseGiven that the maginal propensity to consume (MPC) is 0.50, what is the change in equilibrium output (or aggregate demand), if there is a tax is reduced by 50? Hint: Use the tax multiplier formula. -50 -25 50 25The formula for the tax multiplier is Select one: O a. -MPC/ (MPC + 1). Ob. MPC/ (1 + MPC). Oc. 1/(1- MPC). O d. -MPC/(1 - MPC).
- Algebraically derive the government spending and tax multiplier for the case in which tax revenues depend on income level. Verbally explain what you do in each step of the derivation.What is the effect of an increase in taxes when the economy is above full employment? What is the magnitude of the tax multiplier? An increase in taxes when the economy is above full employment _______ aggregate demand and real GDP, and the price level _______. A. increases; falls B. increases; rises C. does not change; does not change D. decreases; falls The magnitude of the tax multiplier is equal to _______. A. MPC times the government expenditure multiplier B. the government expenditure multiplier divided by MPC C. MPC D. the government expenditure multiplierConsider an economy in which tax collections are always $400 and in which the four components of aggregate demand are as follows: GDP Taxes DI C I G (X - IM) $1,360 $400 $960 $720 $200 $500 $30 1,480 400 1,080 810 200 500 30 1,600 400 1,200 900 200 500 30 1,720 400 1,320 990 200 500 30 1,840 400 1,440 1,080 200 500 30 Find the equilibrium of this economy graphically. What is the marginal propensity to consume? What is the multiplier? What would happen to equilibrium GDP if government purchases were reduced by $60 and the price level remained unchanged?
- 19. If MPC = 0.6, find the tax multiplier. If taxes fall by 50, what will be the change in Y? Will Y increase or decrease? What will be the new Y (Y2) if you are given that Y1 is 250?Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000Miller wants to discourage energy drink purchase, so he's considering a $1 tax or $2 tax on the drink. 1. Is Sen. Miller's plan for a two dollar tax better at stopping consumers from purchasing energy drinks? Why or why not? Incorporate your knowledge of the Laffer Curve in your response.
- If a tax rate of 1/3 of national income were introduced, what would be the new equilibrium level of national income in the economy outlined above. Show all your workings and explain the mechanisms through which the economy reaches the new equilibrium.7) Define the tax multiplier and give the algebraic expression.8) Assume that the government spending multiplier is equal to 4. Calculate the tax multiplier from thisinformation.9) Calculate how much output would expand by if the government increased spending by $500 billion and financedthis spending by increasing lump-sum taxes by the same amount.whenever the government wants to increase revenues it usually trend to increase taxes on goods that have inelastic demand than elastic demand.Why, explain using examples
