Suppose the nation of Vandyland experiences a pandemic in January 2025. Prior to the pandemic, Vandyland's...

 

 

Transcribed Image Text:

Suppose the nation of Vandyland experiences a pandemic in January 2025. Prior to the pandemic, Vandyland's projected GDP for February 2025 is 1,250Billion VD (Vandyland dollars). Due to the pandemic, Vandyland's actual GDP in February 2025 is 1,000Billion VD. On average, consumers in Vandyland spend 50% of their take home income. a. Assuming Vandyland consumers continue to spend 50% of their take home income in February 2025, what size fiscal package would you recommend? Hint: assume an income multiplier of 1/(1-mpc) b. If Vandyland consumers are spending a smaller portion of their take home income, due to the pandemic, would you recommend a smaller or larger fiscal package than the one described in 6a? Why? Suppose the nation of Vandyland experiences a pandemic in January 2025. Prior to the pandemic, Vandyland's projected GDP for February 2025 is 1,250Billion VD (Vandyland dollars). Due to the pandemic, Vandyland's actual GDP in February 2025 is 1,000Billion VD. On average, consumers in Vandyland spend 50% of their take home income. a. Assuming Vandyland consumers continue to spend 50% of their take home income in February 2025, what size fiscal package would you recommend? Hint: assume an income multiplier of 1/(1-mpc) b. If Vandyland consumers are spending a smaller portion of their take home income, due to the pandemic, would you recommend a smaller or larger fiscal package than the one described in 6a? Why?

Answer rating: 100% (QA)

Question 1 Assuming Vandyland consumers continue to spend 50 of their takehome income in February 2025 what size fiscal package would you recommend An... View the full answer