1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities: a. Government expenditures at the equilibrium level of income if T = $160 and I = $100. b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier? c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending

1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities: a. Government expenditures at the equilibrium level of income if T = $160 and I = $100. b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier? c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.A: Graphical Treatment Of Taxes And Fiscal Policy

Problem 3TY

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1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities:a. Government expenditures at the equilibrium level of income if T = $160 and I = $100.b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier?c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending multiplier?d. Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
The following is information for the economy of Tandor, where taxes are wholly autonomous: C = 50+ 0.8YD where YD = (Y-T) G = T = 300 XN 104 -0.15Y I = 150 a. The value of equilibrium income is $ b. At equilibrium, the amount of the budget c. If government increased both its spending and taxes by $70, the new equilibrium income would be $ A) $940, budget Balance is 0 and $1130 B) $1040, budget Balance is 0 and $1080 C) $1140, budget Balance is 0 and $1060 D) $1240, budget Balance is 0 and $1380
7. Algebraically derive the government spending and tax multiplier for the case in which tax revenues depend on income level. Verbally explain what you do in each step of the derivation.
1. Itis known that the demand function for a product in the market shows that Qd = 7+ Pand the supply function (Qs) = 16-P. The product is subject to Rp. 3, - / unit. Specify: a. The equilibrium price and the amount of the equilibrium price in the market before and after the tax b. The amount of tax revenue by the government 2. Note that the consumption function is 40 million + 0.5Y. If the national income is Rp. 200 million, the amount of public savings is|
7 Derive multiplier for a change in the government purchase and the taxes. Why is the tax multiplier smaller than the government purchase multiplier?
Discuss the consequence of a rise in direct taxes to the economy as a whole
2. Why is the tax multiplier smaller than the government spending multiplier?
Match the term to its correct definition. Column A 1. 2. 3. 4. 5. 67 8. a tax for which the percentage of income paid in taxes increases as income increases a tax on the value of a property a tax for which the percentage of income paid in taxes remains the same for all income levels a tax for which the percentage of income paid in taxes decreases as income increases a tax on the dollar value of a good or service being sold a tax on the estate, or total value of the money and property, of a person who has died a tax on the production or sale of a good a tax on a person's earnings % 5 Column B a. progressive tax b. estate tax C. property tax d. regressive tax e. income tax f. excise tax g proportional tax h. es tax
If the MPC is 0.5, the tax multiplier is Select one: a. -1 b. -2.5 C. -1.67 d. -2
An open-economy is characterized by the following: C = 750 +0.8 (Y-T) $$1-1500$$ G = 250 T = 200 X = 800 M = 0.4Y
K Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C = 300+ 0.90(Y-T) Suppose further that investment spending is fixed at 1 = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y= (Round your response to two decimal places.)
K Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C=300+0.90(Y-T) Suppose further that investment spending is fixed at 1 = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = (Round your response to two decimal places.) Y=