Suppose policy makers want to increase GDP by $450 billion. If the marginal propensity to consume is 0.9, by how much must taxes decrease to achieve this target?
What will be an ideal response?
The tax multiplier would be -9 in this case, so taxes must decrease by $50 billion.
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If the government increases expenditure by $40 billion and increases tax revenue by $40 billion, what is the impact on aggregate demand? Explain your answer
What will be an ideal response?
What is the most an individual would be willing to pay on January 1st for a bond that promises to pay $500 at the end of the year for the next three years if the market rate of interest is 5 percent? Explain
What will be an ideal response?
Financial capital flows could include
A) real estate purchases. B) construction of factories. C) sales of a business. D) the purchase of the physical assets and operations of a multinational corporation by another. E) currency market transactions.
If chain-weighted increases in real GDP for 2002-03, 2003-04, 2004-05, 2005-06, and 2006-07 are 5%, 4%, 2%, 1%, and 3% respectively, and nominal GDP in the 2002 base year is $6244.4 billion, then chain-weighted real GDP for 2007 is
A) $6987.02 billion. B) $7,181.06 billion. C) $7235.6 billion. D) $7239.0 billion.