Login


04152011, 12:16 AM  #1 
Been There, Done That.
398
Rep 4,727
Posts 
Economics help!
I am totally lost. A little help, please?
1. Assume that the MPC is .7 and the formula for the fiscal multiplier is as follows: 1/(1MPC) Show your work for each part of the equation: By how much will AD at current prices shift/increase with A.) A $185 billion increase in government purchase B.) A $185 billion tax cut What will the cumulative or total AD shift/increase be(after the multiplier effect) for: C.) Part A Above D.) Part B Above. Assume the Economy has a recessionary GDP gap of 615 billion and an upward sloping AS curve. Will the cumulative impact oft he increase in government spending in part (C) be enough to close the GDP gap? Explain. 
04152011, 12:56 AM  #4 
Been There, Done That.
398
Rep 4,727
Posts 

Appreciate
0

04152011, 01:18 AM  #5 
condoms prevent minivans
110
Rep 223
Posts 
a.
1 / (1  .7) 1 / .3 3.33 or 3 1/3 multiplier b. (.7) / (1  .7) (.7) / (.3) 2.33 or 2 1/3 c. [($185) x (.7)] / (1  .7) $129.5 / .3 = $431.66 or $431 2/3 billion d. ($185) / (1.7) $185 / .3 = $616.66 or $616 2/3 billion e. No, based off the multiplier of $185 billion increased government spending, the result will be $431.33 billion. Unlike the tax cut, the same amount in government spending will not be enough to close the gap of $615 billion. A tax cut of $185 billion would close the gap, using the multiplier. its been awhile, but everything should be correct. i'm 80% sure e is right, but look over it to make sure it makes sense.
__________________
I have strong opinions about things that don't matter.

Appreciate
0

04152011, 01:19 AM  #6  
Second Lieutenant
7
Rep 245
Posts
Drives: fairly quickly.
Join Date: Oct 2010
Location: finding the end of the road

Quote:
__________________
"It will not have enough power until I can spin the wheels at the end of a long straight in top gear."
Mark Donohue 

Appreciate
0

04152011, 01:20 AM  #7  
Been There, Done That.
398
Rep 4,727
Posts 
Quote:
You rock my world. 

Appreciate
0

04152011, 01:22 AM  #9 
Been There, Done That.
398
Rep 4,727
Posts 

Appreciate
0

04152011, 01:51 AM  #11 
Been There, Done That.
398
Rep 4,727
Posts 
No need to fear, Skinnycow was here.

Appreciate
0

04152011, 01:51 AM  #12 
Where my bitches
463
Rep 1,927
Posts
Drives: Cadillac coupe deville
Join Date: Mar 2009
Location: street corner checking profits

passed out drooling on the keyboard after a bottle of wine
__________________

Appreciate
0

04152011, 01:52 AM  #13 
but no flokka
132
Rep 503
Posts 
what collin said
__________________

Appreciate
0

04152011, 08:37 AM  #17 
Banned
292
Rep 10,316
Posts
Drives: A///MERICAN!!!
Join Date: Mar 2010
Location: A///MERICA!!!


Appreciate
0

04152011, 01:56 PM  #18 
Lieutenant General
536
Rep 15,845
Posts
Drives: PTurboS. E93M3/335i/Z435i/M5
Join Date: Jun 2009
Location: The Valley, SoCal

__________________

Appreciate
0

04152011, 01:59 PM  #19 
Been There, Done That.
398
Rep 4,727
Posts 
Skinny, I would like to inform you that you still have it. Got it right. Thanks.

Appreciate
0

04152011, 04:15 PM  #20  
condoms prevent minivans
110
Rep 223
Posts 
Quote:
if you need anymore help, let me know.
__________________
I have strong opinions about things that don't matter.


Appreciate
0

04152011, 08:23 PM  #21 
Been There, Done That.
398
Rep 4,727
Posts 

Appreciate
0

Post Reply 
Bookmarks 
Thread Tools  Search this Thread 

