2. Given: C = 250 + 0.8 Y I= 150 G = 300 TR = 100 (3+3+3+4+3+3+4=23) NX = 100 t =0.25 i) Find the equilibrium level of income. ii) Suppose, because of the current COVID 19 situation C falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)? iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).

2. Given: C = 250 + 0.8 Y I= 150 G = 300 TR = 100 (3+3+3+4+3+3+4=23) NX = 100 t =0.25 i) Find the equilibrium level of income. ii) Suppose, because of the current COVID 19 situation C falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)? iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. Given:
C = 250 + 0.8 Y
I= 150
G = 300
TR = 100
(3+3+3+4+3+3+4=23)
NX = 100
t =0.25
i) Find the equilibrium level of income.
ii) Suppose, because of the current COVID 19 situation C falls to 50, MPS falls to .05, I falls to
10, G falls to 100 and NX falls to 10. How much TR should the government increase to have
the same level of equilibrium income as in part i)?
iii) In determining the required change in TR in part ii), which multiplier did you use and why?
(Hint: keep in mind the consumption tendency households may have under the COVID 19
situation in selecting the multiplier).

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