Suppose a country's MPC is 0.8, and in this country, government seeks to boost real GDP by either increasing government purchases by $50 billion or by reducing taxes by the same amount. Instructions: For changes in real GDP enter your answer as a whole number. Round your answer two decimal places for multipliers. If you are entering a negative number include a minus sign a. If it increases government purchases, real GDP will increase by $ If the government instead lowers taxes, real GDP will increase by $| billion, suggesting an expenditures multiplier of [ billion, suggesting a tax multiplier of b. Now suppose another country's MPC is 0.6, and in this country, government seeks to reduce real GDP by either decreasing government purchases by $50 billion or by raising taxes by the same amount If it decreases government purchases, real GDP will decrease by $[ If the government instead raises taxes, real GDP will decrease by $1 billion, suggesting an expenditures multiplier of billion, suggesting a tax multiplier of c. Which of the following statements best explains the difference in magnitude of the multiplier effects between the expenditures multiplier and the tax multiplier? O The tax multiplier is smaller since some of the extra disposable income is saved with a tax cut. O The multiplier effect is exactly the same since both involve government policy. O The tax multiplier is larger since households spend more and spend better than governments do The tax multiplier is smaller since all governments inevitably spend more than they say they will Your research into a nation has yielded the following information: Autonomous expenditure (A) $3,000 Gross investment (1) -$2,000 Government purchases (G) = $2,500 Net exports (NX)=-$1,000 Taxes (T) $2,000 MPC-0.75 Instructions: Round your answers to nearest whole number. For the coefficient to Y. round your answer to two decimal places a. Substitute the values above into the equation: AE A+ (MPC (Y-T))+1+G+ NX to determine the abbreviated equation for aggregate expenditures (AE). AE 5700 +0.80 Y b. Using the abbreviated equation you computed in part a, complete the table below. Aggregate Real GDP Expenditures (V) (AE) (dollars) 0 S (dollars) 5300 8,000 16,000 24,000 c. Knowing that AE Y at the equilibrium level of output, what is the equilibrium level of output for this nation? Ye: $[ Prev 7 of 10 Next > AE = 5700+ 0.80 Y b. Using the abbreviated equation you computed in part a, complete the table below. Aggregate Real GDP Expenditures (Y) (dollars) (AE) (dollars) e $ 5300 8,000 16,000 24,000 c. Knowing that AE = Y at the equilibrium level of output, what is the equilibrium level of output for this nation? Ye: $ d. What is the expenditures multiplier for this economy? e. If government purchases increase by $1,000, from $2,500 to $3,500, what is the new equilibrium level of output? Ye: $