Exam 26: The Algebra of Demand-Side Equilibrium

In which of the following situations will the combination of the marginal propensity to consume and the proportional income tax rate (t)result in the largest multiplier?

With a proportional income tax,

If the government wants to increase equilibrium income by $150 billion but does not want to change the size of the deficit,it should

If the MPC = 0.8 and both government purchases and autonomous net taxes fall by $100 billion,by how much does the equilibrium level of real GDP demanded change (assuming neither income taxes nor net exports exist)?

The balanced budget multiplier is always negative.

The effect of a new proportional income tax on the spending multiplier is to

A $100 increase in autonomous government purchases has the same effect on the equilibrium level of real GDP as a $100 increase in autonomous investment spending would.

When we relax the assumption that net exports do not change with income,the aggregate expenditure function

If the marginal propensity to consume is 0.8 and the proportional income tax rate is 0.25,by how much would the equilibrium level of real GDP demanded increase if government purchases rose by $50 billion?

With a proportional income tax,

The balanced budget multiplier

If the government increased autonomous net taxes by $60 million and increased its own purchases by the same amount,we would expect the net effect of these actions to be

In a model with a proportional income tax rate (t),real disposable income equals

If the MPC equals the 2/3,then the net tax multiplier equals

An increase in autonomous government purchases will have exactly the same effect as an equal increase in

If the MPC equals 0.75 and the proportional income tax rate is 0.2,the spending multiplier equals

The __________ the proportional tax rate,t,or the __________ the marginal propensity to import,m,the __________ the spending multiplier.

The balanced budget multiplier is equal to

If the government raised transfer payments by $100 million while reducing its own purchases of computers by $100 million,we would expect the net effect of these actions to be

Suppose that government purchases increase by $200 and at the same time autonomous net taxes are increased by $200.If there are neither income taxes nor net exports,the change in equilibrium real GDP demanded will