1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Karo-lina-s [1.5K]
3 years ago
10

An economy is operating with output $300 billion above its natural level, and fiscal policymakers want to close this expansionar

y gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 3/5, and the price level is completely fixed in the short run.
Required:
1. To close the expansionary gap, the government would need ____________.
Business
1 answer:
topjm [15]3 years ago
4 0

Answer:

$120 billion

Explanation:

Economy operating at $300 billion above its natural level of output.

Marginal propensity to consume, MPC = 3/5 = 0.6

For closing this expansionary gap, the government have to decrease its spending by the amount calculated as follows:

Spending multiplier:

= 1/ (1 - MPC)

= 1/ (1 - 0.6)

= 1/ 0.4

= 2.5

Hence, the government spending reduces by

= Expansionary gap ÷ Spending multiplier

= $300 ÷ 2.5

= $120 billion

You might be interested in
Money is neutral in:___________
babunello [35]

Answer:

C

Explanation:

Money neutrality is a theory which submits that money supply only affect nominal variable and not real variables.

Nominal variables include price, wages and exchange rate

real variables include employment and real GDP

Money is only neutral in the long run and not in the short run because of money illusion. Money illusion causes economic agents to respond to money supply changes.

Money is neutral only in the long run

8 0
2 years ago
What kind of bread is boiled before it is baked?
Scrat [10]

Explanation:

Breads such as bagels and pretzels are made by boiling them first because boiling sets the crust before it is placed in the oven. The starch on the exterior quickly gels and forms a barrier. This keeps the water from penetrating very far into the bread. Bagels are usually boiled for 30 to 60 seconds per side.

8 0
2 years ago
Power Pro, a leading manufacturer of lawn and garden equipment, releases a new line of cordless, lightweight, electric weed trim
poizon [28]

Answer: Sales Promotion

Explanation: Sales promotion are different forms of sales strategy employed by marketing firms to attract buyers to their products faster.

Sales promotion could include various strategies such as: price discounts, extra goods added to a purchased product and much more.

3 0
3 years ago
Plutonic Inc. had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities
Sergeu [11.5K]

Answer:

Increase of 130 million

Explanation:

In this question, we are looking to evaluate what has happened to change in deferred tax assets. We proceed as follows;

Firstly, we calculate the current tax.

Mathematically = 40% of 400 million = 40/100 * 400 million = 160 million

Now, as we can see in the question, a decrease in deferred tax asset resulted in an increase in tax expense to a tune of $50 million

This brings the total tax expense to 160 million + 50 million = 210 million

We can see from the question that the company has only recognized a tax expense of $80 million.

This means that the change in deferred tax asset was an increase of 210 million- 80 million = $130 million

8 0
3 years ago
My mother just died just a few minutes ago
kumpel [21]
Oh I'm so sorry for you
4 0
3 years ago
Other questions:
  • Novak Corp. reported net income of $1.20 million in 2022. Depreciation for the year was $192,000, accounts receivable decreased
    12·1 answer
  • Suppose the U.S offered a tax credit for firms that built new factories in the U.S. Then __________a The demand for loanable fun
    10·1 answer
  • Sannella Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales S
    10·2 answers
  • Why do we subtract depreciation in the calculation of EBIAT if we are going to add it back as the next step of the Free Cash Flo
    13·1 answer
  • The income and expenses of a corporation for federal income tax purposes are referred to as what type of income?a. nontaxableb.
    11·1 answer
  • The company allocated manufacturing overhead of using a predetermined overhead rate of per machine hour. The total actual manufa
    12·1 answer
  • The metro system in Chepe City is new, so the government has decided not to sell tickets but to charge a flat amount to each of
    13·1 answer
  • PLEASE HELP NOW
    12·1 answer
  • What is the present value of $1,400 a year at a discount rate of 8 percent if the first payment is received 7 years from now and
    9·1 answer
  • What are your thoughts on Encanto?
    6·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!