where: C= $100+ 0.75 (Y-T) G=$600 T= $600 1= $200 X = $ 50 The economy is in equilibrium at a level of real GDP or income of $ Now suppose that the government decides to increase goverment spending by $50 What is the new equilibrium level of GDP or income? $(Round your answer to the nearest dollar) (Round your answer to the nearest dollar)

where: C= $100+ 0.75 (Y-T) G=$600 T= $600 1= $200 X = $ 50 The economy is in equilibrium at a level of real GDP or income of $ Now suppose that the government decides to increase goverment spending by $50 What is the new equilibrium level of GDP or income? $(Round your answer to the nearest dollar) (Round your answer to the nearest dollar)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.B: Algebraic Treatment Of Taxes And Fiscal Policy

Problem 1TY

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Suppose that the economy is depicted by the following relationship: Expenditures =C+I+G+X where: C = $100+ 0.90 (Y-T) G = $600 T = $600 I = $100 X = $50 The economy is in equilibrium at a level of real GDP or income of $ Now suppose that the government decided to increase taxes by $300. What is the new equilibrium level of GDP or income? $
C = 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
C = 450 + 0.4YI = 350G = 150X = 70Z = 35 + 0.1YT = 0.15YYf = 1550(Hint: use the multiplier method)Q.2.4 Calculate the tax revenue to the government of this country when the economyremains in equilibrium.Q.2.5 Calculate what the new equilibrium income should be if the government of thiscountry decides to cancel all taxes, implying the tax rate would now be 0%.Q.2.6 Before the government decreased the tax rate, how much of governmentspending was required to bring the economy to full employment?
Consider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?
C = 450 + 0.4Y | = 350 G = 150 X = 70 Z = 35 + 0.1Y T= 0.15Y Yf = 1550 Q.2.3 Calculate the equilibrium level of income (Hint: use the multiplier method) | Calculate the tax revenue to the government of this country when the economy Q.2.4 remains in equilibrium. Q.2.5 Calculate what the new eqilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
Use the following equations for exercises 16–18. C = $100 + .8Y I = $200 G = $250 X = $100 – .2Y 16. What is the equilibrium level of real GDP? 17. What is the new equilibrium level of real GDP if government spending increases by $150? 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150?
Consider an economy described by the following equations: C = 300 + 0.90 (Y – T) (Consumption) I = $200 (Investment) G = $300 (Government spending) T = $200 (Taxes) Determine the equilibrium level of national income. Suppose government spending increases to $400. What is the new level of income? What is the government spending multiplier? Suppose taxes increase to $300. What is the new level of income? What is the government tax multiplier? Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,500?C = 5,000 + (MPC)YI = 1,500G = 2,000NX = -500
1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I = 300G = 800T = (1/2)*Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept?b. Find the equilibrium level of output.c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending.ii) Calculate the new equilibrium level of income.iii) Calculate the change in income and compare to the increase in government spending. Comment.iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv).Now G assumes its original value of G = 800.d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level of…
Given the information below, answer the questions that follow. C = $40 + 0.8Y I = $30 G = $40 X – M = -$10 a) What is the equilibrium GDP? Explain why $550 is not the equilibrium. b) What is the marginal propensity to consume (MPC) in this question? (Explain) c) What is the multiplier in this question and explain the significance of the multiplier? (Show all work) d) Assuming that the full employment level of output is $600, what kind of gap exists and how large is it? Explain e) If transfer payments increased by $10 and the price level did not change, what would the new equilibrium be? (Show all work) f) How would your answer to part (e) change if the price level did change?
= 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Q.2.1 Calculate the level of autonomous spending in this economy.(2)Q.2.2Calculate the size of the multiplier(Note: Round your answer to two decimal places)(4)Q.2.3Calculate the equilibrium level of income (Hint: use the multiplier method)(2)© The Independent Institute of Education (Pty) Ltd 2020Page 6 of 10 202020Q.2.4Q.2.5Q.2.6Question 3Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
1. Suppose that the economy can be described by the following equations: C= 400 + (8/9)*DI I= 300 G= 800 T=(1/2)*Y (X -М) 3 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept? b. Find the equilibrium level of output. c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending. ii) Calculate the new equilibrium level of income. iii) Calculate the change in income and compare to the increase in government spending. Comment. iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar. v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv). Now G assumes its original value of G = 800. d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level…