Assume that the consumption function is given by C = 150 + 0.85(Y – T) and the tax function is given by T = t0 + t1Y where C = Consumption, Y = Total output/income, t0 = Autonomous/fixed tax and t1 = Tax rate. If t0 increases by 1 unit, then explain whether consumption will be increased or decreased, and how much?

Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000

Consider the market for rubber. suppose a massive forest fire causes 50% of the world’s supply of rubber to be destroyed. First, depict what happens in the market for rubber. Then, depict what happens in the market for tires (where rubber is an input). Last, depict what happens in the market for cars, where tires are an input. What happened to the price of cars? Now, suppose that in order combat this event, the government announces that starting in three months (i.e. in the future), the government will give a $1000 rebate on purchases of new cars (i.e. the price of cars will decrease in the future). What happens in the market for new cars today? What happens in the market for used cars today? Finally, what is the net effect of everything that occurred on new/used cars equilibrium price and quantity (Hint: for one of these market’s variables, the net effect will be ambiguous)?

Suppose that real GDP is currently $19.3 trillion, potential GDP is $23.0 trillion, the government purchases multiplier is 1.6, and the tax multiplier is -1.6. Holding other factors (such as prices and interest rates) constant, how will taxes (T) need to change to bring the economy to equilibrium at potential GDP? Provide your answer in dollars measured in trillions rounded to two decimal places. Use a negative sign for negative changes. Do not include any symbols, such as "S," "," "%," or "," in your answer. Your Answer: Answer