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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1.2. The consumption function for a simple economy is given by C = 330 + 0.6%d 1.2.1. Write an expression for savings in the economy. ANSWER: 1.2.2. Express consumption in terms of Y when direct taxation is levied as a lumpsum tax, T = 210 ANSWER: 1.2.3. Express the consumption function when a proportional tax, t = 0.25, is added ANSWER:
Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000
Supya 2. Suppose we have an economy characterised by the following functions : C = 100 + 0.8 Y. = 100 G 100 = 100 (a) Find the equilibrium level of income. (b) How much increase in income will take place if government expenditure on goods and services increases by 60 crores ? (c) Find the tax multiplier and balanced budget multiplier.
Suppose that real GDP is currently $19.3 trillion, potential GDP is $23.0 trillion, the government purchases multiplier is 1.6, and the tax multiplier is -1.6. Holding other factors (such as prices and interest rates) constant, how will taxes (T) need to change to bring the economy to equilibrium at potential GDP? Provide your answer in dollars measured in trillions rounded to two decimal places. Use a negative sign for negative changes. Do not include any symbols, such as "S," "," "%," or "," in your answer. Your Answer: Answer
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Suppose the government reduces taxes by 50,000,000, that there is no crowding out, and that marginal propensity to consume is 0.9. What is the total amount of additional economic activity that results from this tax cut?
Consider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?
Suppose that real GDP is currently $1.45 trillion, potential GDP is $1.51 trillion, the government purchases multiplier is 2.4, and the tax multiplier is 2. a. Holding other factors constant, government purchases will need to be increased by $ 0.0250 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) b. Holding other factors constant, taxes have to be cut by $ 0.0300 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) c. Construct an example of a combination of increased government spending and tax cuts that will bring the economy to equilibrium at potential GDP. The combination of increasing government spending by $0.0600 trillion and cutting taxes by $ trillion will bring the economy to equilibrium at potential GDP (Round to four decimal places as needed.) $0.0600 trillion $0.1440 trillion $0.1200 trillion $0.0100 trillion
The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes . The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new consumption line you just plotted to calculate the new total expenditure at two levels of real GDP and fill in the following table. GDP level Total Expenditure (Billions of dollars) (Billions of dollars) 10 90 Use the green points (triangle symbols) to draw the new total…
please answer the following question: 1. Which of the following sources of revenue is used to fund government spending?A) corporate contributionsB) political party contributionsC) taxationD) aggregate supply
Which of the following is true? a. All economists agree that the tax multiplier is smaller than the government spending multiplier. b. In the standard Keynesian textbook analysis, the tax multiplier is greater than the government spending multiplier. c. There is disagreement among economists regarding the size of the tax multiplier relative to the size of the government spending multiplier. d. All economists agree that the tax multiplier is greater than the government spending multiplier.
6. Graphical treatment of taxes and fiscal policy The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. REAL CONSUMER SPENDING (Billions of dollars) 8 40 30 8 0 + + + O + ++ 20 40 60 REAL GDP (Billions of dollars) 80 + O + 100 Consumption with Tax Increase through a Fixed Tax Consumption with Tax Increase through a Variable Tax The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new consumption line you just plotted to calculate the new…