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eduard
3 years ago
10

Calculate the values for each of the questions. Assume that in each country there are no taxes, international trade, or inflatio

n and that interest rates are fixed. The Italian government decides to stimulate the economy by sending checks worth $ 70 billion to Italian consumers. If the government spending multiplier is 1.5 , calculate the MPC to determine the final change in Italy's real GDP due to the transfer. Please give your answer as a whole number in billions of dollars. $ billion The Greek government decides to introduce new austerity measures, which reduce government direct spending by $ 16 billion. Greece has a marginal propensity to consume of 0.6 . What will be the final change in real GDP as a result of this decreased spending? Please give your answer as a whole number in billions of dollars. $ billion The Japanese government decides to stimulate the economy by increasing direct spending by $ 70 billion. If the final change in real GDP is $ 280 billion, what is Japanese consumers' marginal propensity to consume (MPC)? Please round your answer to two decimal places.
Business
1 answer:
Inessa [10]3 years ago
3 0

Explanation:

a. The computation is shown below:

As we know that

Multiplier = 1 ÷ 1 - MPC

1.5  = 1 ÷ 1 - MPC

So, MPC is 0.3333

Now the real GDP is

= Multiplier × Government spending

= 0.3333 × $70 billion

= $105 million

So the change in real GDP is

= $105 million - $70 million

= $35 million

b. The computation is shown below:

As we know that

Multiplier = 1 ÷ 1 - MPC

Multiplier  = 1 ÷ 1 - 0.6

So, multiplier is 2.5

Now the real GDP is

= Multiplier × Government spending

= 2.5 × $16 billion

= -$40 million

c. As we know that

Real GDP = Multiplier × Government spending

$280 billion = Multiplier × $70 billion

So, the multiplier is 4

Now the MPC is

Multiplier = 1 ÷ 1 - MPC

4 = 1 ÷ 1 - MPC

So, the multiplier is 0.75

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Answer:

Expectancy theory

Explanation:

Expectancy theory states that when an individual is faced with different choices they will be motivated in a certain way in choosing a particular option based on what they expect to be the result of the choice.

So behaviour is affected by perceived result or consequence of a particular choice.

In the given scenario Joyce works hard and puts in many extra hours, and getting a promotion is most important to Joyce.

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3 years ago
Suppose the Imperial Galactic Bank has received $1,000 of deposits and all banks face a required reserve ratio of 10 percent. Wh
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Answer:

Money Multiplier= 1/ reserve ratio = 1/10% = 10

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So, option d is the correct option.

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3 years ago
Julie Lambert has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The bal
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You invested in a $5,000 bond in 2012 with a coupon rate of 6%. What will be its value in 2018 if the required rate of return is
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Answer:

$4540.19

Explanation:

Step 1: Get the formula for the value of the bond  in 2018

Formula= P * (1+r)n

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r= Coupon rate=6%

n= Period or number of years = 6 years

Step 2: Calculate the value of the bond in 2018

Value of the bond in 2018= 5000 * (1+ 0.06)6

= 7092.60

Step 3: Calculate the Present value of the bond

Formula= (P x Present Value Factor) + (Interest x The present value interest factor of an annuity (PVIFA))

(P x Present Value Factor) = (5000 x 1\(1+r)^n)

where r= rate of return= 8%

n= years = 6

(Interest x The present value interest factor of an annuity (PVIFA) =

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PVIFA= 1\(1+r)^n}

where r= rate of return= 8%

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=4540.19

5 0
2 years ago
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