Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 17, Problem 3E
(a)
To determine
The user cost of capital in the given economy, if the corporate income tax increases from 10 percent to 20 and 30 percent.
(b)
To determine
The effect of an increase in the corporate tax on the steady-state investment of an economy.
(c)
To determine
The relationship between the corporate income tax and the steady-state investment of an economy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
4) Distinguish between the short-run and long-run factors that affect residential investment.
Decisions for Tomorrow The following section provides estimates of time spent in traffic delays.
Stagnant Infrastructure Investment
Over the last several decades the United States has allocated about 2.5 percent
of GDP to public infrastructure. About a fourth of this investment comes from the
federal government and the remainder from state and local governments. In 2019
total spending was about $450 billion, just 2.3 percent of GDP. At that rate of
investment, the United States has barely been able to maintain existing
infrastructure, much less expand it. The American Society of Civil Engineers says
that 4,095 of the nation's 85,000 dams are in need of repair. They estimated that
the nation's infrastructure everything from highways to sewers-needs a $3.6
trillion upgrade.
The Cost of Delay
The U.S. Department of Transportation estimates that people now spend nearly
3.5 billion hours a year in traffic delays. If the nation's highways don't improve,
those delays will skyrocket to more…
2.1 Question 1 Consider the following model of the economy:
Y, =C+I+GY, = 8,000 G, = 2,500 T, = 2,000 C, = 1,000+(y-7) I, = 1,200-100r (a) In this economy, compute
private saving, public saving, and national saving. (b) Find the equilibrium interest rate. (c) Now
suppose that G is reduced by 500. Compute private saving, public saving, and national saving. (d) Find
the new equilibrium interest rate.
Chapter 17 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- (a) Assume that Gross Domestic Product (GDP)/Total output (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y – T) where T is the tax. Investment (I) is given by the equation I = 2,000 – 100r, where r is the real rate of interest, in percent. Taxes (T) are 500, and government spending (G) is also 500. What are the equilibrium values of C, I, and r?arrow_forwardIn a private closed economy (a) the marginal propensity to save is 0.2, (b) consumption equals income when consumption is $120 billion, and (c) the level of investment is $40 billion. What is the equilibrium level of income? Multiple Choice $320 billion $280 billion $198 billion $262 billionarrow_forwardSuppose an economy’s steady-state investment rate I/Y is 30 percentwhen the corporate tax rate is zero. What happens to this investmentrate if the corporate tax rate rises to 20 percent? 30 percent?arrow_forward
- Suppose that the Federal funds rate rose from 3% to 6% during the year. What would you expect to happen to the rate of growth in real consumption, and in the consumption/income ratio, under the following circumstances? (A) The corporate bond rate rose from 6% to 9%. (B) The corporate bond rate remained unchanged at 6%. (C) The stock market declined 20%. (D) The stock market was unchanged. (E) The unemployment rate rose from 5% to 6%. (F) The unemployment rate was unchanged.arrow_forwardA consumption tax that replaces an income tax a) only taxes a household on the money it spends. b) discourages saving. c) would likely result in a lower level of saving than an income tax. d) ultimately taxes income twice—once when the household pays income tax and once when the household makes a purchasearrow_forwardGive typing answer with explanation and conclusion Investment adds to the nation's stock of capital so long as no resources are allocated to consumption. True/Falsearrow_forward
- (a) Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively. What is MPC, MPS and autonomous consumption Derive the saving function. What is the equilibrium level of income? Y= AD=C+I+G If government purchases increase to $150 million, what is the new equilibrium level of income? What level of government purchases is needed to achieve an income of $2000 million? From question e) you get the newly government purchase. Now find out the multiplier value What is the amount of shift in AD curve? [Use the multiplier value from e)] (b) In a self-regulating economy “X”, labor supply is 40 million but labor demand is 10 million. What will happen in goods and service market simultaneously? Explain this situation with relevant graph. Based on your findings in a) is it denoting long run equilibrium? If not, will the economy be able to restore…arrow_forward32) An increase in autonomous investment spending will likely cause ___________.arrow_forwardWhich of the following will necessarily result in an increase in output? a. Decrease in the population wealth and increase of taxes b. Increase in government spending and sharp increase in input prices C. Decrease in the population wealth and sharp increase in input prices d. Increase in government spending and the development of new more efficient technologiesarrow_forward
- Which of the following would likely increase private saving? a. both expansion of means testing and a consumption tax b. expansion of means testing, but not a consumption tax c. a consumption tax, but not expansion of means testing d. neither expansion of means testing nor a consumption taxarrow_forwardA) :What is S if Y=200, AE=260, C=220 and I=40 in an imaginary economy?B) : If the disposable income is 200 and the consumption expenditure is 220 in an imaginary economy, what are the savings? C) University Café earned 20 TL by selling 10 bagels in one day. The total cost of 1 bagel is 0.5 TL. It is assumed that the cafe has no other costs. What is the firm's accounting profit?arrow_forwardExplain THREE (3) factors that can influence investment in an economy.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education