Consider a 3-setor economy and its PAE = 50 + 0.7Y, which sets the equilibrium output topotential output.a Determine the equilibrium income and the size of multiplier.b. If the tax rate (1) is 0.1, what is the marginal propensity to consumer? c.Assume there is an exogenous decrease in investment spending by 10 units due to a pessimistic expectation of the economy (a business expectation is called the animal spirits' by Keynes). Determine the new equilibrium output and output gap.d. Suppose that government wants to use a tax cut (i.e., a lower r) to eliminate the output gap in (c). Determine the new tax rate to achieve this goal.

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the MPC equals .8, and potential output (Y*) equals 9000, then taxes must ______ by ________ to eliminate any output gap.Group of answer choicesdecrease, 20increase, 200increase, 225increase, 250decrease, 200

11) Suppose President Obama is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75. What happens to equilibrium GDP?A) There is a $20 billion increase in equilibrium GDP.B) There is a $20 billion decrease in equilibrium GDP.C) There is a $15 billion increase in equilibrium GDP.D) There is a $15 billion decrease in equilibrium GDP.12) What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.A) 5.3B) 10C) 11.1D) 10013) In an open economy, the government purchases multiplier will beA) larger as the marginal propensity to import increases.B) smaller as the marginal propensity to import increases.C) larger as the marginal propensity to tax increases.D) smaller as the marginal propensity to consume increases.14) Calculate the government purchases multiplier if the marginal propensity to consume equals 0.8, the tax rate is 0.1, and the marginal propensity to import equals 0.2.A) 2.1B) 1.9C) 1.7D) 1.415) The government purchases multiplier will be larger if the marginal income tax rate decreases.16) The larger the marginal propensity to import, the larger the government purchases multiplier.17) In a closed economy with fixed or autonomous (non-income dependent) taxes, the balanced budget government purchases multiplier is negative.18) Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.5.19) Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9, the tax rate equals 0.25, and the marginal propensity to import equals 0.15.20) Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.21) Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.8, the tax rate equals 0.2, and the marginal propensity to import equals 0.05.

Suppose we know the multiplier of a country is 4. Assume that only consumption and investment spendings depend on the output level, the amount of taxation is exogenous, and the investment behaviour equation is known to be I = 2,000 + 0.1 Y. The marginal propensity to consume in this country is then __ Group of answer choices0.750.5uncertain from the information given0.65

Consider a simple Keynesian model with taxation. Suppose the marginal tax rate is t = 0.4 and the marginal propensity to consume is c = 0.66. Then an exogenous increase in investment demand of 100 units will:             Group of answer choicesIncrease equilibrium output by approximately 150 unitsIncrease equilibrium output by approximately 167 unitsIncrease equilibrium output by approximately 267 unitsIncrease equilibrium output by approximately 750 units

In the simple Keynesian model, which of the following statements is false? Group of answer choices An increase in the marginal propensity to save will reduce the level of income in the economy. The reduction in output from an increase in taxation is larger the smaller is the marginal propensity to consume. An increase in lump sum taxation accompanied by an increase in government spending of the same size will increase output. The equilibrium level of output does not depend upon the size of the money multiplier.