what happens to aggregate output if both taxes and government spending are lowered by $300 billion and mpc

The answer is:

1. consumers' expenditure increases by $150 billion

2. output will decrease by $600 billion

Explanation:

Tax impact:

$300 billion x 0.5

= $150 billion.

If taxes are lowered by $300 billion, consumers' expenditure increases by $150 billion because with lower tax, there is money money to be spent because their disposable income has increased.

Government spending impact:

$300/(1-0.5)

$300/0.5

=$600 billion.

Due to government spending that has increased by this amount, output will decrease by this amount too because government has directly competed with firms that should have used this money to increase the total output.

Therefore, net effect on total output is $300billion($600 - $300)

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know