AP Macro Spending and Tax Multipliers

MPC = .8

Consumption Spending Increases by $10B

What is the net effect on AD?

• Increase of $50B

• Decresae of $50B

• Increase of $40B

• Decrease of $80B

MPS = .25

Consumption Spending Increases by $5M

Investment Spending Increases by $2M

What is the net effect on AD?

• Increase of $25M

• Decrease of $25M

• Increase of $28M

• Decrease of $28M

MPS = .4

What is the Tax Multiplier?

• -1.5

• 2.5

• 2

• -1.25

MPC = .8

Net Exports increases by $20B

Government cuts taxes by $5B

What is the net effect on AD?

• Increase of $80B

• Increase of $120B

• Increase of $125B

• Increase of $100B

MPC = .9

What is the spending multiplier?

• 10

• -10

• 9

• 1

MPS = .1

Government Cuts Spending by $40B

Government Cuts Taxes by $100B

What is the net effect on AD

• Increase of $500B

• Increase of $860B

• Decrease of $1300B

• Decrease of $140B

MPC = .75

Consumption Spending Increases by $10B

Investment Spending Increases by $20B

Net Exports Decrease by $5B

What is the net effect on AD?

• Increase by $200B

• Zero net effect

• Increase by $100B

• Decrease by $100B

MPS = .2

The government will collect an additional $50B in taxes this year.

What will the net effect on GDP be?

• An Increase of $400B

• An Increase of $100B

• A Decrease of $200B

• A Decrease of $180B

MPC = .6

Businesses in the US incresae purchases of capital by $20B

The government increaes taxes on individual salary earners by $10B

What is the net effect on AD?

• Increase of $23B

• Decrease of

  $37.5B

• Increase of $35B

• Increase of $50B

Country X is operating at an Equilibrium output level of $200B. If Country X cuts taxes by $20B with an MPC of .9 what will the Equilibrium output level be?

• $380B

• $400B

• Zero net effect

• $222B