Need help with 1 through 9 please. Suppose now a government is established:• Tax rate = 12.5%• Government expenditure = 1001. The new aggregate expenditure function is AE =Y2. The new multiplier is3. The new equilibrium GDP is Y =4. The new output gap is5. The government's budget balance function is BB =Y6. The government's budget balance at the equilibrium iswhich is a7. The structural budget balance is SBB =which is a8. What level of government spending would close the outputgap?9. As a result, the government's new (structural) budgetbalance is An economy with no government is described by the following:• Marginal propensity to consumer = 0.8• Marginal propensity to import = 0.2• Autonomous expenditure = 500• Potential GDP = 1500

Answered: • Tax rate = 12.5% • Government…

• Tax rate = 12.5% • Government expenditure = 100 1. The new aggregate expenditure function is AE = %3D Y 2. The new multiplier is 3. The new equilibrium GDP is Y =

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 1SQ

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Need help with 1 through 9 please.

Suppose now a government is established:
• Tax rate = 12.5%
• Government expenditure = 100
1. The new aggregate expenditure function is AE =
Y
2. The new multiplier is
3. The new equilibrium GDP is Y =
4. The new output gap is
5. The government's budget balance function is BB =
Y
6. The government's budget balance at the equilibrium is
which is a
7. The structural budget balance is SBB =
which is a
8. What level of government spending would close the output
gap?
9. As a result, the government's new (structural) budget
balance is

An economy with no government is described by the following:
• Marginal propensity to consumer = 0.8
• Marginal propensity to import = 0.2
• Autonomous expenditure = 500
• Potential GDP = 1500

Expert Solution

Step 1

Disclaimer :- as you posted multipart questions we are supposed to solve the first 3 questions only as per the guidelines.

aggregate expenditure or e say aggregate demand is the summation of consumption , Investment , government expenditure and net export.

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