Problem 1: You are given the following model for the economy of a country: Consumption function: C=2000+0,75-YDI Investment function: I=10500 Government spending: G = 12000 Tax function: T= - Disposable income: YDI =Y -T+TR Transfer: 1000 T=200+0,4·Y a) What is the level of equilibrium output? b) What is the new equilibrium output if investment decreases by 2 000 units? c) How much does the government collect in taxes when the economy is in equilibrium?

Problem 1: You are given the following model for the economy of a country: Consumption function: C=2000+0,75-YDI Investment function: I=10500 Government spending: G = 12000 Tax function: T= - Disposable income: YDI =Y -T+TR Transfer: 1000 T=200+0,4·Y a) What is the level of equilibrium output? b) What is the new equilibrium output if investment decreases by 2 000 units? c) How much does the government collect in taxes when the economy is in equilibrium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1a) and b)