ECON 201 Section 11
Handout 33-1 (10 Points)
Complete the following exercises.
1. Describe a policy measure the government can use to close a recessionary gap.
2. Illustrate your response to question 1 in a graph.
3. Describe a policy measure the government can use to close an inflationary gap.
4. Illustrate your response to question 3 in a graph.
Handout 34-1 (5 Points)
Working with Multipliers
Complete the following exercises.
1. Assume the MPC is 0.80 and the government increases spending on cancer research by $15 billion. What is the value of the initial impact on real GDP? What is the value of the total impact on real GDP?
2. Assume the MPC is 0.80 and policy makers have targeted real GDP to increase by $200 billion. By how much must taxes be reduced to achieve this goal?
Handout 35-1 (10 Points)
Computing Surpluses, Deficits, and the Debt
The following data is from the government of Macroland. Work in pairs to complete the following exercises. (Note: All data are in billions of dollars.)
|
Year |
Tax revenue (T) |
Government spending on goods & services (G) |
Transfer payments (TR) |
|
2016 |
$2,000 |
$1,200 |
$600 |
|
2017 |
1,600 |
1,500 |
900 |
|
2018 |
1,700 |
1,400 |
700 |
|
2019 |
2,200 |
1,000 |
500 |
|
2020 |
2,400 |
1,600 |
800 |
1. Determine the value of the budget balance and indicate whether there is a government surplus, deficit, or balance for each year.
2. Determine the value of the government debt for the period 2016–2020.