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Sonja [21]
3 years ago
9

Carson had partial ownership of a property. he sold his ownership share for $40,000 and never told the other owners until the cl

osing was complete. carson was a
Business
1 answer:
Masteriza [31]3 years ago
3 0
<span>Carson was a joint tenant. In property law, a joint tenant owns a share of a piece of property. A joint tenant has the right to sell all or part of their share of the property as they so choose. Here, Carson sold part of the property (the part that he owned) for $40k. As a joint tenant he had the right to do so, and did not have to notify the other tenants of his decision to sell.</span>
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Answer:

a. The government needs to increase spending by $0.45 billion and decrease taxes by $0.5 billion.

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d. If government overestimates MPC change in spending or taxes will be too small.

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Government spending multiplier

= \frac{1}{1-MPC}

=  \frac{1}{1-0.9}

= 10

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= \frac{GDP\ Gap}{Government\ spending\ multiplier}

= \frac{4.5}{10}

= $0.45 billion

Tax multiplier

= \frac{-MPC}{1-MPC}

= \frac{-0.9}{1-0.9}

= -9

The government needs to decrease taxes

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b. The marginal propensity to consume is 0.50.

Government spending multiplier

= \frac{1}{1-MPC}

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= 2

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The real GDP will increase by

= Increase\ in\ spending\ \times\ Spending\ multiplier

= \$ 0.45\ \times\ 2

= $0.9 billion

The real GDP will fall short of potential GDP by

= $4.5 billion - $0.9 billion

= $3.6 billion

c. Tax multiplier

= \frac{-MPC}{1-MPC}

= \frac{-0.5}{1-0.5}

= -1

If the government decreases taxes by $0.5 billion

The real GDP will increase by

= $0.5\ billion\ \times 1

= $0.5 billion

The real GDP will fall short of potential GDP by

= $4.5 billion - $0.5 billion

= $4 billion

d. If the government overestimates the value of the MPC, then its change in spending or taxes will be too small and real GDP will fall short of potential GDP.

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