Business, 18.12.2019 04:31 tburlew01

Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion.

a. if these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (mpc) to be?
b. now suppose the economists allow for crowding out. would their new estimate of the mpc be larger or smaller than their initial one?

Answers: 2

Show answers

Answers

Answer from: skyemichellec

Consider the following calculations

Explanation:

a. MPC = dC/dY =30-10/30 =2/3

b. MPC will be smaller because the MPC relies heavily upon the real (inflation-adjusted) rate of interest.And crowding out causes increase in interest rate. A high rate of interest causes spending in the future to become increasingly attractive due to the intertemporal substitution effect on consumption.

Because a rate increase primarily decreases the present value of lifetime wealth, the consumer relies on becoming a lender to offset this effect. In a two period model, as S(1+r) increases with the interest rate, so does future income[C= -(1+r)c +we(1+r)]. Therefore, every dollar of current income spent by the consumer is 1(1+r) dollars the consumer will not be able to spend in the second period.

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

Answer from: Quest

Follow me on instagram teemazin

Another question on Business

Business, 22.06.2019 11:00

Which ranks these careers that employers are most likely to hire from the least to the greatest?

Answers: 2

Answer

Business, 22.06.2019 21:00

China's new 5 percent tax on disposable wooden chopsticks, reflecting concerns about deforestation, has been praised by environmentalists. the move is hitting hard at the japanese, who consume 25 billion set of wooden chopsticks annually. almost all of the chopsticks used in japan come from china. the reuirements for chinese manufacturers of wooden chopsticks to pay the 5 percent tax is a factor in their external environment.

Answers: 3

Answer

Business, 22.06.2019 21:40

Inventory by three methods; cost of goods sold the units of an item available for sale during the year were as follows: jan. 1 inventory 20 units at $1,800 may 15 purchase 31 units at $1,950 aug. 7 purchase 13 units at $2,040 nov. 20 purchase 16 units at $2,100 there are 18 units of the item in the physical inventory at december 31. determine the cost of ending inventory and the cost of goods sold by three methods, presenting your answers in the following form: round your final answers to the nearest dollar. cost inventory method ending inventory cost of goods sold a. first-in, first-out method $ $ b. last-in, first-out method $ $ c. weighted average cost method $ $

Answers: 3

Answer

Business, 22.06.2019 21:40

Which of the following is one of the main causes of inflation? a. wages drop so workers have to spend a higher percentage of income on necessities. b. demand drops and forces producers to charge more to meet their costs. c. rising unemployment cuts into national income. d. consumers demand goods faster than they can be supplied.

Answers: 3

Answer

You know the right answer?

Suppose economists observe that an increase in government spending of $10 billion raises the total d...

Questions