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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

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Which set of terms correctly completes this statement?
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a

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3 0
2 years ago
A turret lathe section has eight machines, all devoted to the production of the same part. The section operates 10 shifts/wk. Th
kodGreya [7K]

Answer:

Pc = 8294.4 units per week

Explanation:

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Where

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