MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Chapter 11.B, Problem 2TY
To determine
To describe: The value of G that would make GDP equal to 1800.
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C = 450 + 0.4Y
I = 350
G = 150
X = 70
Z = 35 + 0.1Y
T = 0.15Y
Yf = 1550
Calculate the tax revenue to the government of this country when the economy remains in equilibrium.
Calculate what the new equilibrium income should be if the government of this 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 + 0.4Y 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 is consumer expenditure
T is tax revenue
Y is aggregate output
I is investment expenditure
r is interest rate
G is government expenditure
L is money demand
M is money supply
Derive the relevant matrix inverse (do not use Cramer's rule) to solve for the equilibrium level of income in
terms of government expenditure (G). At what level of public spending does the government balance its
budget? (Hint: the endogenous variables are Y and r).
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