3. Suppose an economy is represented by the following equations. Consumption function C= 200 + 0.8Yd Planned investment I= 400 Government spending G= 600 Exports EX= 200 Imports IM = 0.1Yd Autonomous Taxes T= 500 Marginal Tax Rate t=0.2 Planned aggregate expenditure AE = C+I+G+ (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy

3. Suppose an economy is represented by the following equations. Consumption function C= 200 + 0.8Yd Planned investment I= 400 Government spending G= 600 Exports EX= 200 Imports IM = 0.1Yd Autonomous Taxes T= 500 Marginal Tax Rate t=0.2 Planned aggregate expenditure AE = C+I+G+ (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An economy has the following characteristics: Y = National income Taxes = T = 0.25Y C = Consumption = 400+ 0.85(Y – T) 1 = 300 G = 200 (Exports) X = 500 (Imports) M = 0.1(Y – T) Find the equilibrium for this economy. If potential GDP is 3,500, then what change in government spending is needed to achieve this level? Do this problem two ways. Either plug 3,500 into the equations and solve for G, or calculate the multiplier and figure it out that way.
Consider the following equations that describe an open economy with government, where government transfers equal $0. C = 320 + 0.6YD I = 936 Budget Balance 0.2Y - 534 NX = 712-0.08Y Part a: Determine the equilibrium level of GDP. Part b: Suppose potential GDP is 4,000 (Y*). Determine the value of G2 if the goal is to stabilize the economy by restoring equilibrium GDP to its potential level. Verify that you have the correct value for G2 by solving for the equilibrium GDP. Part c: How has the magnitude of the multiplier and the AE curve changed because of the changes to government spending? Use 2 to 3 sentences to provide an explanation that supports your answer. Part d: Government spending returns to Gị and the government wants to achieve potential GDP by altering the tax rate (t). Determine the value of t2 that will restore Y = Y*. Verify that you have the correct value for t2 by solving for the equilibrium GDP. Part e: How has the magnitude of the multiplier and the AE curve changed…
Suppose you have an open economy with Government sector imposing tax to finance its expenditures. This economy is described as follows: (in billion dollars) C = 250 + 0.85YD where tax rate is 10 percent. autonomous investment expenditures are 140 billion dollars, autonomous government expenditures are 80 billion dollars, autonomous transfer payments are 100 billion dollars, NX = 0 d) Calculate the budget surplus. e) If investment expenditures decrease by 25 billion dollar what would be the change in equilibrium income? How much is the new equilibrium income?
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Use the information below for a four sector economy, answer the following questions: C 300+0.6 Yd T = 60 1 = 300 G = 650 X = 600 M 350 +0.15 Y C = Consumption function T = Tax function I = Investment function G = Government expenditures function X = Export function M=Import function Y = National Income YD = Disposable Income function Yf = Full Employment Income Ye Equilibrium income a. What is the value of autonomous expenditures? Number b. What is the slope of aggregate expenditure? Number c. What is the value of equilibrium GDP? Number d. What is the value of the autonomous tax multiplier? Number e. What is the value of Consumption (C) at equilibrium? Number f. What is the value of Savings at equilibrium? Number
C = 600 + 0.8Yd , Yd = Y – T, Tg = 100, I= 200, R = 50, G = 350, X = 250 and M = 200 + 0.1Y. How much tax has to be reduced so that the national income will increase by 2000? Based on the answer in Question 2(a), if the government undertakes expansionary fiscal policy by increasing government expenditure by 400, calculate the new equilibrium level of income. After being at the equilibrium level of income in Question 2(e) above, if the government reduces the tax by 400, what is the new equilibrium level of income? Starting with the original information above, if the government runs a balanced budget i.e. increases the government expenditure and tax by the same amount (ΔG = ΔT = 400 which Δ means changes), calculate the new equilibrium level of income. Draw a diagram to show this situation
The federal government decides to stimulate the economy and increases government expenditure on new infrastructure projects by 110 billion. The marginal propensity to consume is MPC = 0.3 and the marginal propensity to import is MPI = 0.05. Suppose the crowding-out effect is twice the amount of government spending, what is the change in output caused by the stimulus package of 110 billion in a closed economy? Number
if investment spending at each level of output increases by $120 billion, what will equilibrium output and income be?
What is equilibrium income in Hypothetical? What is the government deficit? Whatis the balance of Trade?
Assume the following to answer the following questions: C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000 By how much must government spending increase or decrease to close this gap and bring the economy to Potential Output? Show your work
17 The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Price Level 160 140 120 100 80 60 40 20 0 (40, 100) Fiscal Policy LRAS प्रै ======= AD₁ billion AS 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) $| Suppose instead that the MPC is 0.5. AD Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.
Refer to the photo below. What is the equilibrium level of income for this economy if Y = C + I + G ? a. 240.71 b. 240.86 c. 242.86 d. 242.91 What is the size of the tax multiplier for this economy? a. 2.19 b. 2.29 c. 2.31 d. 2.6