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egoroff_w [7]
3 years ago
6

If the marginal propensity to consume is 0.6, the marginal propensity to save is 0.4, and government spending increases by $2 bi

llion at the same time taxes rise by $2 billion, equilibrium income will:
Business
2 answers:
WINSTONCH [101]3 years ago
7 0

Answer: Equilibrium income will increase by $800 million

Explanation:

When taxes rises  means tax rate increased, an increase in tax rate decreases consumption and income. Increase in Government spending increases  income

the increase Government Spending by $2 Billion will increase income by $2 Billion.  An increase in taxes will decrease Consumption by $1.2 Billion ($2 billion x 0.6)

Equilibrium income will increase by $800 million (2 billion - 1.2 billion)

zvonat [6]3 years ago
4 0

Answer:

increase by $2 billion

Explanation:

If the government increases both spending and taxes by the same amount, equilibrium income will increase by the amount of the government spending which will result in an increase in total aggregate demand.

If we follow a Keynesian analysis, we can determine the net effect:

change produced by government spending increase = change G / G multiplier = $2 / 0.4 = $5 billion

G multiplier = 1 - MPC or MPS

the change produced by taxes = - (MPC x change T) / MPS = - (0.6 x $2 billion) / 0.4 = -$1.2 billion / 0.4 = -$3 billion

net effect = $5 billion - $3 billion = $2 billion

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3 0
2 years ago
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sladkih [1.3K]

Answer:

Cost per pound of the trail mix:       $

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In this case, we need to determine the total cost of the trail mix, which is the quantity of each ingredient multiplied by price per ingredient. Then, we will calculate the cost per pound of the trail mix, which is the total cost divided by the total pounds of ingredients.

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In mixing the lowest income category with the next lowest, recoding would have occurred.

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