Stion 4 The Government introduces a tax increase. Answer the folo (a) Use the Keynesian Cross to determine how the policy affects national income, Y, in the short run. (b) Is it possible to predict the magnitude of the change in Income? Explain (c) Based on your answer from part (a), how does consumption, C, change? Explain (d) Now use the IS-LM model to predict how the policy affects national income in the short run. (e) How does the magnitude of the change in national income in part (d) compare with the magnitude of the change in part (a)? If they differ, what accounts for the difference? Explain Please write out your answer and scan and upload it at the end of the

Stion 4 The Government introduces a tax increase. Answer the folo (a) Use the Keynesian Cross to determine how the policy affects national income, Y, in the short run. (b) Is it possible to predict the magnitude of the change in Income? Explain (c) Based on your answer from part (a), how does consumption, C, change? Explain (d) Now use the IS-LM model to predict how the policy affects national income in the short run. (e) How does the magnitude of the change in national income in part (d) compare with the magnitude of the change in part (a)? If they differ, what accounts for the difference? Explain Please write out your answer and scan and upload it at the end of the

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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