Question

Data for 9-4 Homework: Problem Set

GDP	Taxes	DI	C	I	G	C+I+G
1250	200		800	300	200
1500	200		1000	300	200
1750	200		1200	300	200
2000	200		1400	300	200
2250	200		1600	300	200
2500	200		1800	300	200
2750	200		2000	300	200

This table represents several different potential output scenarios for a hypothetical economy. Based on the information presented, complete the following:

1. Calculate the Disposable Income (DI) at each level of GDP.
2. Calculate total spending (C+I+G) at each level of GDP.
3. What is the equilibrium level of GDP in the economy?
4. When the economy is at equilibrium, what is the level of saving?
5. What is the value of the MPC?
6. What is the value of the expenditure multiplier?
7. What is the value of the tax multiplier?
8. If the government increases spending by $100, what would be the new equilibrium value of GDP?
9. If the government wanted to achieve the same change in GDP as in part 8 by cutting taxes instead of increasing spending, how large would the tax cut need to be?