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saw5 [17]
2 years ago
11

2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $32 billion. Four e

conomists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 8 and the tax multiplier is 4. Economist B believes that the government spending multiplier is 4 and the tax multiplier is 2. Compute the amount the government would have to increase spending to close the output gap according to each economist's belief. Then, for each scenario, compute the size of the tax cut that would achieve this same effect.
Business
1 answer:
Umnica [9.8K]2 years ago
8 0

Answer:

For the Economist A the spending multiplier  is = 8, the tax multiplier = 4, the increase in spending is = $4 billion, the tax cut is = $8 billion.

For the Economist B, the spending multiplier is =4, the tax multiplier = 2, the increase in spending is = $8 billion, the tax cut is = $16 billion.

Explanation:

Solution

Given that:

(1)The Economist A

The Spending multiplier = 8

In closing the output gap of $32 billion, required increase in spending = $32 billion / 8 = $4 billion

Thus,

The tax multiplier = 4

To close output gap of $32 billion, required decrease in tax = $32 billion / 4 = $8 billion

(2)The Economist B

Now,

The spending multiplier = 4

To close output gap of $32 billion, required increase in spending = $32 billion / 4 = $8 billion

So,

Tax multiplier = 2

To close output gap of $32 billion, required decrease in tax = $32 billion / 2 = $16 billion

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stira [4]

Answer:

Amount of money invested is $2,000 and $4,000

Explanation:

In this question, we are asked to calculate how much was invested in two different accounts given the amount of money invested in both accounts.

Let the amount of money invested in both accounts be a and b respectively.

Mathematically;

A + B = 6000 ......I

Now we use the formula for simple interest to check the amount that is supposed to be made on Both accounts if he end of a year.

Formula for simple interest is I = PRT/100

Let’s apply this to what is on ground:

5*1* a/100 = 5a/100

Second is

9*b*1/100 = 9b/100

That is 5a + 9b = 38,000. ........ii

Solving Both simultaneously as follows:

Let A = 6000-b from 1

Substitute this into 2

5(6000-b) + 9b = 38,000

30,000 -5b + 9b = 38,000

4b = 8,000

b =$2000

This means a would be 6000 - 2,000 = $4000

8 0
3 years ago
Which of the following are reasons that the short-run aggregate supply curve slopes upward?
kaheart [24]

Answer:

The short-run aggregate supply curve slopes upward because of all of the following reasons except a. in the short run, as prices of final goods and services increase, some firms are very slow to adjust their prices, thus their sales increase. b. in the short run, an unexpected change in the price of an important resource can change the cost to firms.

Hope this helps :)

5 0
2 years ago
You invest $600 in security A with a beta of 1.5 and $400 in security B with a beta of 0.90. The beta of this portfolio is _____
klio [65]

Answer:

Beta= 1.26

Explanation:

<u>First, we will calculate the proportion of the portfolio of each security:</u>

Security A= 600/1,000= 0.6

Security B= 400/1,000= 0.4

<u>Now, the beta of the portfolio:</u>

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)

Beta= (0.6*1.5) + (0.4*0.9)

Beta= 1.26

7 0
3 years ago
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5 0
3 years ago
A coin sold at auction in 2017 for $1,965,500. The coin had a face value of $5 when it was issued in 1794 and had previously bee
aksik [14]

Answer:

0.0642 or 6.42%

Explanation:

The period 't' between the year when the coin was issued, 1794, and 1971 is:

t=1971-1794 \\t=177\ years

If the coin had a value of $5 and after a period of t=177 years it was worth $305,000, the annual tax rate by which the coin appreciated is determined by:

305,000 = 5*(1+r)^{177}\\r=\sqrt[177]{61,000}-1\\r=0.0642=6.42\%

The annual rate was 0.0642 or 6.42%.

4 0
3 years ago
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