10. Critical analysis Q11 Marginal tax rates were cut substantially during the 1980s, and although rates were increased in the early 1990s, the marginal rates applicable in the highest income brackets were still well below the top rates of the 1960s and 1970s. decrease Complete the following statement. increase The lower rates of the 1980s and 1990s were for the economy because rate reduction was accompanied by an in revenues derived from the capital gains taxes and personal income taxes collected from high-income taxpayers.

10. Critical analysis Q11 Marginal tax rates were cut substantially during the 1980s, and although rates were increased in the early 1990s, the marginal rates applicable in the highest income brackets were still well below the top rates of the 1960s and 1970s. decrease Complete the following statement. increase The lower rates of the 1980s and 1990s were for the economy because rate reduction was accompanied by an in revenues derived from the capital gains taxes and personal income taxes collected from high-income taxpayers.

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. The following is information for the economy of Texas, where taxes are wholly autonomous: C = 40 + 0.8YD where YD = (Y – T) G = T = 360 I = 120 XN = 107 – 0.1Y a. What is the value of equilibrium income? b. At equilibrium, what is the amount of budget deficit or budget surplus? c. If government increased both its spending and taxes by $60, what would be the new equilibrium income?
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Explain the supply-side effects of fiscal policy on employment and potential GDP
17 The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Price Level 160 140 120 100 80 60 40 20 0 (40, 100) Fiscal Policy LRAS प्रै ======= AD₁ billion AS 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) $| Suppose instead that the MPC is 0.5. AD Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.
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Price Level aa- 0 X AS AD₂ AD₁ Z Price Level X AS AD₂ AD' AD₁ YZ Real GDP (Billions) Graph A Real GDP (Billions) Graph B Refer to the diagrams. Suppose that government undertakes fiscal policy designed to increase aggregate demand from AD₁ to AD2 and thereby to increase GDP from X to Z. In terms of graph B, which of the following might explain why GDP increases to Y rather than to Z? decrease in the saving schedule crowding-out effect reduction in tariffs imposed by our trading partners depreciation of the dollar
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INTEREST RATE (Percent) Demand LOANABLE FUNDS (Billions of dollars) Supply Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. Demand Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to Shift the appropriate curve on the graph to reflect this change. The implementation of the new tax credit causes the interest rate to Supply Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government implements a new investment tax credit. This change in spending causes the government to run a budget Shift the…
4) What are direct expenditure offsets and how do they influence the effects of fiscal policy?