A) The aggregate consumption function of Ekonland is known to be C= a + bYa and the tax structure is T = To + t·Y, where t is a fixed % income tax 1) Derive the expression for the equilibrium Y. Be sure to clearly show what the Expenditure Multiplier and the Tax Multiplier are. 2) Suppose we know that a = 25, b = 0.75, I= 50, Xn= 10, G = 70, To = 30, and t = 0. Calculate Ekonland's equilibrium GDP (i.e. Y).

A) The aggregate consumption function of Ekonland is known to be C= a + bYa and the tax structure is T = To + t·Y, where t is a fixed % income tax 1) Derive the expression for the equilibrium Y. Be sure to clearly show what the Expenditure Multiplier and the Tax Multiplier are. 2) Suppose we know that a = 25, b = 0.75, I= 50, Xn= 10, G = 70, To = 30, and t = 0. Calculate Ekonland's equilibrium GDP (i.e. Y).

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 7SQ

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