Management in Life Annabelle and Bettina share a dorm room. They like each other, but they disagree about how often to clean. Ev
1 answer:
You might be interested in
Answer:
a. The government needs to increase spending by $0.45 billion and decrease taxes by $0.5 billion.
b. The real GDP will fall short of potential GDP by $3.6 billion.
c. The real GDP will fall short of potential GDP by $4 billion.
d. If government overestimates MPC change in spending or taxes will be too small.
Explanation:
The GDP gap is $4.5 billion.
a. The marginal propensity to consume is 0.90.
Government spending multiplier
=
=
= 10
The government needs to increase spending by
=
=
= $0.45 billion
Tax multiplier
=
=
= -9
The government needs to decrease taxes
=
=
= $0.5 billion
b. The marginal propensity to consume is 0.50.
Government spending multiplier
=
=
= 2
If the government increases spending by $0.45 billion,
The real GDP will increase by
=
=
= $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
=
=
= -1
If the government decreases taxes by $0.5 billion
The real GDP will increase by
=
= $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.
The correct amount of net asset value is $33. 66. Net asset value is termed as the value of the asset after the evaluation of the company's profit and evaluating the paid-off debt of the firm.
Computation of the total net value:
The computation of the net asset value is:
Therefore, the correct option is D.
To know more about the calculation of the net asset value, refer to the link below: