HW 6.docx - Part 1 Multiple choice questions Questions 1-8...

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Part 1: Multiple choice questions: Questions 1-8 are worth 3 points each. Questions 9-12 are worth 4 points each. Move To... This element is a more accessible alternative to drag & drop reordering. Press Enter or Space to move this question. Question 1 3 / 3 pts Consider the following modeli) C = 1650 + mpc (Y - tY)ii) I = 800iii) G = 500iv) X - M = 500 - mpi (Y)where:<div><p><em>Consider the follow ing<p>Given the information above</div>
Y = C + I + G + X-M Y = 1650 + mpc(1-t)Y + 800 + 500 + 500 - mpi Y Y - mpc(1-t)Y + mpiY = 3450 Y [ 1 - mpc(1-t) + mpi ] = 3450 Y = 1 / [1 - mpc(1-t) + mpi] X 3450 Y = 1 / [1 - .6(1-.15) + .2] X 3450 Y = 5000 Move To... This element is a more accessible alternative to drag & drop reordering. Press Enter or Space to move this question. Question 2 3 / 3 pts We know that the formula for the (government) spending multiplier is 1/(1-[mpc(1-t) - mpi]). The value of the government spending multiplier in this problem is: Round to 2 decimal places.Correct!376751.4598544.3338672.0416451.67<div><p>We know that the formula fo</div><div></div>1.454.332.041.67
Move To... This element is a more accessible alternative to drag & drop reordering. Press Enter or Space to move this question. Question 3 3 / 3 pts When we discussed the multiplier we discussed the impact effect. For example, suppose that G increases by 100 to 600 and we assume, as we often do, that firms match the increase in demand by increasing Y by 100. In round two, this is an increase in income of 100 to consumers. We will trace out exactly where this 100 increase in income goes in the second round. Recall, there are three leakages to address (via taxes, imports and savings).Given that t=.15, we know that .15 of every dollar increase in gross income is a leakage due to taxes. Since the increase in income is $100, we know the leakage due to taxes is:<div><p>When w e discussed the mu</div><div></div> 70031 $25 10691 $85 17785 $100 Correct!87900 $15 We have three leakages: tracing out 100: for every additional dollar in gross income, the consumer saves 40 cents since the mpc = .6. The government gets 15 cents since the tax rate is . 15. And finally, 20 cents is leaked out to the purchase of imported goods. Multiplying by 100 we have the following: Y up by 100, savings up by 40, taxes up by 15, imports up by 20, consumption up by 25 $25 $85 $100 $15
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