B) falls by $100 billion. D) increases by $100 billion. 13) If the tax multiplie
ID: 1119103 • Letter: B
Question
B) falls by $100 billion. D) increases by $100 billion. 13) If the tax multiplier is -9 and taxes are reduced by $100 billion, output A) falls by $900 billion. increases by $900 billion. 14) If the tax multiplier is-12 and taxes are increased by $6 billion, output falls by $72 billion. C) increases by $2 billion. B) falls by $2 billion. D) increases by $72 billion. Refer to the information provided in Table 9.3 below to answer the questions that follow. Table 9.3 All Numbers are in $ Million Planned I-Mpc=ops output Net Planned Government (Income) Taxes Consumption Savings Investment Spending 120 40 1,000 200 1,100 200 200 1,300 200 1,400 200 1,500 200 1,600 200 200 200 200 200 200 200 200 760 840 200 200 200 200 200 200 t 20= /(00-1,200 : MPS 180 200 220 1,000 1,080 1,160 15) Refer to Table 9.3. Assuming constant MPC at income of $1,200 million, saving is s_ lion, at income of $1,600 million, saving is million. C) 170 250 160; 240 B) 150; 230 D) 180; 260 16) Refer to Table 9.3. The MPC in this economy is and the MPS is A) 0.9: 0.1 B0.8:02 C) 0.5:0.5 17) The President of Vulcan hires you as an economic consultant. He is concerned that the output level in Vulcan is too high and that this will cause prices to rise. He feels that it is necessary to reduce output by $10 billion. He tells you t the best advice to give to the Vulcan president? at the MPC in Vulcan is 0.6. Which of the following would be A) increase taxes by $10 billion B)-increase taxes by $2.5 billion C) reduce government purchases by $10 billion reduce government purchases by $4 billionExplanation / Answer
13. change in output = tax multiplier *(change in tax)
Change in output = -9*( -100) = $900 billion
Option C)
14 change in output = tax multiplier *(change in tax)
Change in output = -12*(6) = -$72 billion
Option B)
15
Disposable income hen output = 1200 is 1200-200 = 1000. Consumption is 840. savings = Disposable Income- Consumption = 160
When output is 1600 disposable income = 1400. Savings = Disposable income – consumption = 1400-1160 = 240 .
So, option A is correct
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