The following table shows part of a country's national expenditure schedule (in billions). National income...

 

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The following table shows part of a country's national expenditure schedule (in £ billions). National income (Y) National expenditure (E) 100 115 120 130 145 140 160 180 200 220 160 175 190 205 (a) What is the government expenditure multiplier? (b) What is the tax multiplier? Assume that full employment is achieved at a level of national income of £200 billion. (c) Is there an inflationary or a deflationary gap, and what is its size? (d) By how much would government expenditure have to be changed in order to close this gap (assuming no shift in other injections or withdrawals)? (e) Alternatively, by how much would taxes have to be changed in order to close the gap (again assuming no shift in other injections or withdrawals)? (f) Alternatively, assuming that there were initially a balanced budget, and that the government wanted to maintain a balanced budget, by how much would both government expenditure and taxes have to be changed in order to close the gap? The following table shows part of a country's national expenditure schedule (in £ billions). National income (Y) National expenditure (E) 100 115 120 130 145 140 160 180 200 220 160 175 190 205 (a) What is the government expenditure multiplier? (b) What is the tax multiplier? Assume that full employment is achieved at a level of national income of £200 billion. (c) Is there an inflationary or a deflationary gap, and what is its size? (d) By how much would government expenditure have to be changed in order to close this gap (assuming no shift in other injections or withdrawals)? (e) Alternatively, by how much would taxes have to be changed in order to close the gap (again assuming no shift in other injections or withdrawals)? (f) Alternatively, assuming that there were initially a balanced budget, and that the government wanted to maintain a balanced budget, by how much would both government expenditure and taxes have to be changed in order to close the gap?

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A Government Expenditure Change in Expenditure Change in National Income Govern... View the full answer