--%>
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 : What is Finance Letter Finance Letter

    Finance Letter (FL): The proposals made, by the Director of Finance to the chairpersons of the budget committees in each and every house, to amend the Budget Bill and the Governor's Budget from that presented on January 10 to reflect a revised plan of

    		•
  • Q : Describe the terminal value calculation

    Describe the terminal value calculation at the ending of the forecast period. Why is it crucial? The firm which business operation is being valued is not accepted to suddenly cease operating at the ending of the discrete forecasting period, how

    		•
  • Q : Supply of automobile tires Normal 0

    Normal 0 false false

    		•
  • Q : Explain Object of Expenditure Object of

    Object of Expenditure (Objects): It is a categorization of expenditures based on the kind of goods or services received. For illustration, the budget group of Personal Services comprises the objects of Salaries and Wages and Staff Benefits.

  • Q : What is Availability Period

    Availability Period: The time period throughout which an appropriation might be encumbered (that is, committed for expenditure), generally specified by the law making the appropriation. When no particular time is given in financial legislation, the pe

    		•
  • Q : Healthcare Finance Issues Question 1 A.

    Question 1 A. What per visit price must be set for the service to break even? To earn an annual profit of $100,000? (10,000 * 5.00 - $500,000 - 50,000 = 0

    Q : Bg explain factors that responsible for

    explain factors that responsible for the recent surge in international market

    		•
  • Q : Explain Continuously Vacant Positions

    Continuously Vacant Positions: On July 1, the positions which were continuously vacant for six successive monthly pay periods throughout the prior fiscal year are abolished by the State Controller's Office. The six successive monthly

    		•
  • Q : Explain Expenditures by Category

    Expenditures by Category: A budget display, for each and every department, which reflects actual precedent year, estimated present year, and proposed budget year expenses presented by the character of expenditure (example, State Operations and/or Loca

    		•
  • Q : Reimbursement Warrant or Revenue

    Reimbursement Warrant (or Revenue Anticipation Warrant): A warrant which has been sold by the State Controller’s Office, as an outcome of a cash shortage in th

    		•