0
If government spending increases 5B and your MPC is a 90 how much does GDP increase?
Mag143
From such an action (increase in government spending by 5 billion and a Marginal Propensity to Consume of 90%), the GDP would increase (in the scope of simplicity) by 4.5 billion. This is because government expenditures is counted in GDP, and in this case 90% of it is consumed by the populace, so 5B * .9 = 45B.
But, being that the GDP is Consumption + Gross Investment + Govt. Spending +(-) Imports/exports, one could suggest that the GDP would increase by just 5B because that which is not consumed is saved (and thus invested).
Wiki User
∙ 15y ago
Add your answer:
Earn +20 pts
What are some negative aspects of tourism?
spending too much money
How much Supertanker captain salary?
BP Shipping Master Salary £62,000 - 67,000, tax free is spending more than 183 days out of UK per annum. There are also options for company shares etc which can increase the total package to £75,000+.
The Credit crunch the Recession money is being lost everywhere and since no one will destroy money Where is it disappearing Where is all the money going?
actuly i think i do no i think its just going into the the wallets of the people who think there iportant No I don't think its going to these people. All this money is going to the government. The government is spending it on useless things. The government needs to stop taxing us so much so we can get back on our feet!!
How did the current world financial crisis spread?
there are many ways the financial crisis spread.: 1) the $700 billion dollar bail out. 2) too many mega million lottos. 3) lastly, government keeps spending too much on wars, and public works.
How much of congress backs credit card relief?
The congress backs credit card relief by changing it so that a person can limit the cap on their credit card. This allows for more or less spending and less fees for over spending.
Why the government spending multiplier is different form the tax multiplier?
The government spending multiplier is different form the tax multiplier from the top of my head is because the government spending total effect ripples off. That is if government spending increase then the total income increases. When total income increase, consumption increases, when consumption increases total income increases further (as consumption is a factor of total income), and this pattern is carried forward. This is the the multiplier effect, such that an increase in government spending's final impact on income is much bigger than its initial increase. The tax multiplier on the other hand, has a much smaller effect than government spending. This is because tax is only a portion of the consumer income. That is, if there is a tax cut, consumers only save a fractional amount (specifically 1-MPC) of a tax cut. As a result of the smaller boost in spending form ma tax cut, the ripples/multiplier effect of a tax cut is much less than an increase in government spending.
Fahrenheit increases by 27 how much does Celsius increase by?
Celsius increases by 15 for a 27 degree increase in Fahrenheit.
Why did defense spending increase so much?
The increase in US defense spending in 1952 was to fund the American-Korean War or what Americans call the Korean War.
Wich reactions would have an increase in entropy?
A gas typically increases the entropy much more than the increase in moles.
How much money did the government spend on health care in 2006?
In 2006, US health care spending was $7,026. This expenditure was an increase of 6.7 percent from the prior year for a price tag of $2.1 trillion dollars.
How much is a gagillion doallers?
The amount of money the government is spending on welfare for people like you.
What are two ways to grow the economy using monetary policy?
There are two basic ways: 1. Increase the government's spending. It is a good way to grow the economy . The money the government spends goes into the economy as wages, profit, and revenue. most government spending adds some money to the economy. The drawbacks to this is that it is very hard to control. Politicians have a knack for spending gobs of money carelessly. If it is not reigned in quickly, it can cause massive inflation, large government debt, and ultimately lead to a need to increase taxes, which brings us to the second way... 2. Cut taxes. It gives money back to consumers and businesses,Also it has one major drawback: unlike outright governemnt spending, it is NOT a quick fix. This is because some of the money will be saved or invested, so it is not spent (and thus given to workers as wages and businesses as revenue) as quickly as government spending. But this reason is also why it is so much more effective than government spending. The market decides where to spend the money from cut taxes.
What happen if congress decreases taxes and increases government spending?
There are many different types of scenarios regarding this. Allot depends on how much of an increase in spending, along with how much of a decrease in tax rates. Generally speaking, lowing taxes helps individuals and companies to retain more of their income. Clearly this income saved is not placed under a mattress. Extra income is often spent by increasing production and thus even at lower tax rates the increase in taxable income rises. This benefits all including government revenues. The problem comes if spending outstrips the extra tax income from the private sector. Then interest rates on government borrowing becomes higher. Adding to a high deficit makes for a certain degree of lost confidence in the way a government handles its finances. On the individual side, a decrease in taxes gives the consumer more income to spend or save. If spending is increased then sales taxes gain income. The spending also keeps companies in business and they are able to hire more people. If the consumer decides to save their extra income, it gives banks more funds to lend to other consumers and to businesses.
When did the united states develop a budget deficit?
To many government-run programs; to much spending!
When magnitude increases by 1 on the Richter scale how much does the ground motion increase?
10 times
What would be expected effect on consumer spending and on the unemployment rate if the United states government were to increase personal income tax rates?
Some say that the people will have more money. The government will have no money to build more roads, more buildings, and more schools. The problem is finding a good middle between too much tax and not enough tax.
Why does a producer not increase quantity supplied in response to price increase?
Producers only increase quantity supplied in response to DEMAND increases. They only want to make as much as someone will buy.
