IV. (10 Points) List the 5 Primary Goals for Macroeconomic Policy. 1. 2. 3. 4. 5

Question

IV. (10 Points) List the 5 Primary Goals for Macroeconomic Policy. 1. 2. 3. 4. 5. V. If the estimated Marginal Propensity to Consume (MPC) -0.8. A) What kind of change in Aggregate Output should one expect from an economic stimulus program that plans on increasing government deficit level spending by $500 billion? (Show formulas and all work) (10 Points) B) What kind of change in Aggregate Output should one expect from a change in payroll tax withholdings that is expected to decrease tax revenues by $200B? (Show formulas and all work) (10 Points)

Explanation / Answer

Ans

A multiplier=1/1-mpc=1/1-0.8=5 so change=5(500)=2500Biliion

B tax multipluer=mpc/1-mpc=0.8/0.2=4.so change=200(4)=800 billion

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