11:04 AM ECON 122 CAT ONE.docX Phoenix Files QUESTION ONE Is it desirable for a country to have a large gross domestic product? Explain (2 marks) QUESTION TWO You are given data on the following variables in an economy Government spending 300 Planned investment Net exports Autonomous taxes Income tax rate Marginal propensity to consume 0.5 a) Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonom ous consumption (2 ma rks) ii) 200 S 50 b) Solve for the equilibrium level of output in the following two scenarios: i) There is an income tax t=0.1, Edit 0.1 250 Q Search © | 46| 472 [ 66 c) In the economy with an income tax of 10%, what is the budget balance of the government? (2 marks) O X: × There is no income tax in the economy. Denote these two variables by Yw and YN respectively. (4 marks) d) Solve for the change in net exports that would bring the equilibrium output lev el in the economy with the income tax to the level of YN that you found in part b. specify both the magnitude of the change and whether it is an increase or a decrease. What would be the new level of net exports after this change? (2 marks) e) Suppose that we would like to achieve the same goal (as in part d) by changin g the level of autonomous taxes instead of that of net exports. So, net exports re main at 50 and the level of autonomous taxes changes instead. Find the nece ssary magnitude of the change and specify whether autonomous taxes would have to increase or decrease. What would be the new level of autonomous tax es that accomplishes this goal? (3 marks) ▶ × Save as Share
11:04 AM ECON 122 CAT ONE.docX Phoenix Files QUESTION ONE Is it desirable for a country to have a large gross domestic product? Explain (2 marks) QUESTION TWO You are given data on the following variables in an economy Government spending 300 Planned investment Net exports Autonomous taxes Income tax rate Marginal propensity to consume 0.5 a) Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonom ous consumption (2 ma rks) ii) 200 S 50 b) Solve for the equilibrium level of output in the following two scenarios: i) There is an income tax t=0.1, Edit 0.1 250 Q Search © | 46| 472 [ 66 c) In the economy with an income tax of 10%, what is the budget balance of the government? (2 marks) O X: × There is no income tax in the economy. Denote these two variables by Yw and YN respectively. (4 marks) d) Solve for the change in net exports that would bring the equilibrium output lev el in the economy with the income tax to the level of YN that you found in part b. specify both the magnitude of the change and whether it is an increase or a decrease. What would be the new level of net exports after this change? (2 marks) e) Suppose that we would like to achieve the same goal (as in part d) by changin g the level of autonomous taxes instead of that of net exports. So, net exports re main at 50 and the level of autonomous taxes changes instead. Find the nece ssary magnitude of the change and specify whether autonomous taxes would have to increase or decrease. What would be the new level of autonomous tax es that accomplishes this goal? (3 marks) ▶ × Save as Share
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:11:04 AM
ECON 122 CAT ONE.docX
Phoenix Files
QUESTION ONE
Is it desirable for a country to have a large gross domestic product? Explain (2 marks)
QUESTION TWO
You are given data on the following variables in an economy
Government spending
300
Planned investment
Net exports
Autonomous taxes
Income tax rate
Marginal propensity to consume
0.5
a) Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonom
ous consumption
(2 ma
rks)
ii)
200
S
50
b) Solve for the equilibrium level of output in the following two scenarios:
i)
There is an income tax t=0.1,
Edit
0.1
250
Q
Search
© | 46| 472 [ 66
c) In the economy with an income tax of 10%, what is the budget balance of the
government?
(2 marks)
O
X:
×
There is no income tax in the economy. Denote these two variables by Yw
and YN respectively.
(4 marks)
d) Solve for the change in net exports that would bring the equilibrium output lev
el in the economy with the income tax to the level of YN that you found in part
b. specify both the magnitude of the change and whether it is an increase or a
decrease. What would be the new level of net exports after this change?
(2 marks)
e) Suppose that we would like to achieve the same goal (as in part d) by changin
g the level of autonomous taxes instead of that of net exports. So, net exports re
main at 50 and the level of autonomous taxes changes instead. Find the nece
ssary magnitude of the change and specify whether autonomous taxes would
have to increase or decrease. What would be the new level of autonomous tax
es that accomplishes this goal?
(3 marks)
▶ ×
Save as
Share
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