26 Jul WHAT IS THE NEW EQUILIBRIUM GDP DUE TO THE INCREASED GOVERNMENT SPENDING?
This economy is open to international trade as shown by the export and import figures of columns 3 a Show more This economy is open to international trade as shown by the export and import figures of columns 3 and 4 in the table below. Complete the gray shaded cells in columns 5 and 6. Instructions: Enter your answers as whole numbers. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. Given these values what is the equilibrium GDP? $ billion. What is the marginal propensity to consume? Instructions: Round your answer to 1 decimal place. MPC = . What is the value of the multiplier? . b. Incorporate government into the table by assuming that it plans to spend $20 billion at each possible level of GDP. What is the new equilibrium GDP due to the increased government spending? $ billion. c. Now incorporate taxes into the table by assuming that the government plans to tax households $20 billion at each possible level of GDP (T increases by $20 billion). Also assume that the tax is a personal tax and includes the government spending increase from part b. What is the change in consumption due to the tax increase? $ billion. Accounting for both the increased government spending and taxation what is the new equilibrium GDP? $ billion. What is the change in equilibrium GDP caused by the addition of government? $ billion Show less
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