Problem 1. The following specifications are given for an economy: Consumption, C = 250 + 0.75 Yawhere Y, is disposable income Government expenditure G = 150 Investment I = 80 Taxes T = 200 (i) Find the equilibrium level of income (Y), Consumption (C) and Private Sector Saving (S) (ii) Using the value of tax multiplier, how much will income increase if taxes are reduced by 30 ?

Problem 1. The following specifications are given for an economy: Consumption, C = 250 + 0.75 Yawhere Y, is disposable income Government expenditure G = 150 Investment I = 80 Taxes T = 200 (i) Find the equilibrium level of income (Y), Consumption (C) and Private Sector Saving (S) (ii) Using the value of tax multiplier, how much will income increase if taxes are reduced by 30 ?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.6P

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