An economy is described by the following equations:C = 500 + 0.85(Y – T), Cis consumption, Y is income and T is taxationM=0.05(1-t)YimportsIP = 1500,planned investmentG = 400,government spendingT = tY,t = 0.2 is the marginal tax rateX = 1200,X is exportsI. The equilibrium level of output for the above economy is 22500Do NOT include any letters, spaces or symbols (e.g. "$" or ",") in your answer.II. The multiplier for this economy is equal to 6.67(Round to 2decimal places)III. Suppose that, in this economy, there is an exogenous decrease in spending of180. This economy will now be experiencing expansionarygap. Possibleanswers (write ONE of the following only): "a contractionary" OR "anexpansionary".IV. If the potential output of the economy is 10,000, the size of the output gaparising from part III will beDo NOT include any letters, spaces or symbols (e.g. "$" or ",") in your answer.V. If the Okun's Law beta parameter is 2, the cyclical unemployment rate associatedwith parts III and IV is equal to%.

C=500+0.85(Y-T) M=0.05(1-t)Y IP=1500 G=400 T=ty

Answered: An economy Is described by the…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 1TY

See similar textbooks

Similar questions

The President of Westeros hires you as an economic consultant. He is concerned that theoutput level in Westeros is too high and that this will cause prices to rise. He feels that it isnecessary to reduce output by $10 billion. He tells you that the MPC in Westeros is 0.6.Which of the following would be the best advice to give to the Westeros president?A) reduce government purchases by $4 billionB) increase taxes by $10 billionC) reduce government purchases by $10 billionD) increase taxes by $2.5 billion
Consider a closed economy. The profits of private corporations constitute a fraction ?of national income. These profits are subject to corporate tax and a fraction ? of the net profits is distributed to owners. The remaining profits are invested in theeconomy. To encourage investment, the government proposes to cut the corporation tax. The corporation tax is proportional and so is the regular tax but the rates are notnecessarily the same.Analyse the effects of the government proposal assuming that wages and pricesare flexible. Will there be any ambiguity about the results?
. Suppose the United States economy is repre- sented by the following equations: Z = C + I + G, C = 500 + 0.75YD, T = 600, I = 300, YD = Y − T , G = 2000 Given the above variables, calculate the equilibrium level of output. assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?
C = 450 + 0.4YI = 350G = 150X = 70Z = 35 + 0.1YT = 0.15YYf = 1550Q.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%.
Net taxes are taxes paid minus O A. subsidies O B. consumption expenditure of households O C. capital expenditure D. cash benefits received from governments
In the economy of Kwartengland, the following figures are given for economic activity which was undertaken in 2013. All the figures are million Ghana Cedis Consumption Expenditure = 1000 + 0.8 YD Investment Spending= 600 Government Expenditure = 2450 Personal Taxes= 100 Exports= 100 Imports= 150 1. Calculate the investment and tax multipliers 2. By how much should exports change if government wishes to increase real GDP by 1000?
ASSUME THAT A THREE SECTOR ECONOMY IN COUNTRY W. THE AMOUNT OF AUTONOMOUS CONSUMPTION IS RM 300 MILLION WITH PROPORTION OF AN INCREASE IN INCOME THAT IS SPENT ON CONSUMPTION IS 0.5. AN INDUCED TAX OF 20% IS IMPOSED BY THE COUNTRY. THE AMOUNT OF IS RM 250 MILLION AND THE AMOUNT OF GOVERNMENT SPENDING IS RM 150 MILLION. CALCULATE THE NATIONAL EQUILIBRIUM INCOME.
Please no written by hand and no emage Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C=40+0.5*(Y-T) Suppose G= 165 billion, I=50 billion, and T=10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y=C+I+GY=C+I+G, the equilibrium output level is equal to _____ billion. Suppose the government purchases are increased by $100 billion. The new equilibrium level of output will be equal to _____ billion. Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to _____.
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?
What are the three injection into the income-expenditure flow? O Government Spending, Consumer Spending. Exports O Goverment Spending. Investment, Exports : O Government Spending, Investment, Imports
Y S G X-IM 935 -250 320 40 70 2,100 320 140 40 3,220 250 320 200 -150 4,800 375 320 240 -185 5,320 650 320 320 - 340 6,300 825 320 340 -340 Assume taxes are equal to zero. What is the equilibrium level C for the above economy? 4,425 4,800. 5,175. 4,010.

SEE MORE QUESTIONS

Recommended textbooks for you

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

SEE MORE TEXTBOOKS