Suppose an economy had aggregate demand components with the following relationships: Consumption spending, C=140+.60*(DY) Investment spending,I=25+.15*Y Government Spending, G= 0 Net Export Spending,X=0 Tax collections, Tx=0 a. What is the equilibrium income for this economy? b. If the government decided to increase G spending by 6, what would be the new equilibrium income for this economy? c. If instead the government decided to reduce Tx (taxes) by 10, what would be the new equilibrium income for the economy? d. If instead the government decided to increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium for this economy?
Suppose an economy had aggregate demand components with the following relationships: Consumption spending, C=140+.60*(DY) Investment spending,I=25+.15*Y Government Spending, G= 0 Net Export Spending,X=0 Tax collections, Tx=0 a. What is the equilibrium income for this economy? b. If the government decided to increase G spending by 6, what would be the new equilibrium income for this economy? c. If instead the government decided to reduce Tx (taxes) by 10, what would be the new equilibrium income for the economy? d. If instead the government decided to increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium for this economy?
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 1TY
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Question
Suppose an economy had aggregate
Consumption spending, C=140+.60*(DY)
Investment spending,I=25+.15*Y
Government Spending, G= 0
Net Export Spending,X=0
Tax collections, Tx=0
a. What is the equilibrium income for this economy?
b. If the government decided to increase G spending by 6, what would be the new equilibrium income for this economy?
c. If instead the government decided to reduce Tx (taxes) by 10, what would be the new equilibrium income for the economy?
d. If instead the government decided to increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium for this economy?
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