Suppose an economy is characterised by the following: C = 160 + 0.6 (400 - T) | = 150 G = 150 T = 100 %3D Determine: i) The equilibrium output level ii) If G rises to 200, what is the new equilibrium level of output? iii) If taxes fall by 50, how much will equilibrium output rise? iv) Based on your calculations in parts ii) above, does higher level of government spending or tax cut have a greater effect on output?

Suppose an economy is characterised by the following: C = 160 + 0.6 (400 - T) | = 150 G = 150 T = 100 %3D Determine: i) The equilibrium output level ii) If G rises to 200, what is the new equilibrium level of output? iii) If taxes fall by 50, how much will equilibrium output rise? iv) Based on your calculations in parts ii) above, does higher level of government spending or tax cut have a greater effect on output?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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