6. The government of Fisclandia is planning its budget for the 2022 financial year. Projected exports are $61 million, and projected imports are $73 million. Expected investment in the economy is $128 million per year. Consumption is given as 70% of income after tax, with the income tax rate currently set at 12%. Government spending is planned to be $117 million. a) i) Calculate the Balance of Trade for the nation. ii) Explain briefly what effect you would expect this to have on the exchange rate with other currencies, assuming a clean float. b) i) Calculate the equilibrium level of income in the economy in the 2022 financial year.
6. The government of Fisclandia is planning its budget for the 2022 financial year. Projected exports are $61 million, and projected imports are $73 million. Expected investment in the economy is $128 million per year. Consumption is given as 70% of income after tax, with the income tax rate currently set at 12%. Government spending is planned to be $117 million. a) i) Calculate the Balance of Trade for the nation. ii) Explain briefly what effect you would expect this to have on the exchange rate with other currencies, assuming a clean float. b) i) Calculate the equilibrium level of income in the economy in the 2022 financial year.
Chapter1: Making Economics Decisions
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Problem 1QTC
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![6. The government of Fisclandia is planning its budget for the 2022 financial
year. Projected exports are $61 million, and projected imports are $73
million. Expected investment in the economy is $128 million per year.
Consumption is given as 70% of income after tax, with the income tax rate
currently set at 12%. Government spending is planned to be $117 million.
a) i) Calculate the Balance of Trade for the nation.
ii) Explain briefly what effect you would expect this to have on the
exchange rate with other currencies, assuming a clean float.
Calculate the equilibrium level of income in the economy in the 2022
financial year.
b) i)
ii) Calculate the amount of income tax received by the government and
hence explain whether there is a budget surplus or deficit.
c) The government decides to replace the planned government spending of
$117 million with a commitment to set government spending equal to tax
revenues (a balanced budget) with the tax rate increased to 15% of
national income. Write down the aggregate demand function in this case
and hence determine the new equilibrium level of income.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F802a3ef3-6585-480a-9e5c-ce732d54fa71%2F1997a881-ad57-4b5d-b2ae-17e0a2caaad3%2F25msttq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:6. The government of Fisclandia is planning its budget for the 2022 financial
year. Projected exports are $61 million, and projected imports are $73
million. Expected investment in the economy is $128 million per year.
Consumption is given as 70% of income after tax, with the income tax rate
currently set at 12%. Government spending is planned to be $117 million.
a) i) Calculate the Balance of Trade for the nation.
ii) Explain briefly what effect you would expect this to have on the
exchange rate with other currencies, assuming a clean float.
Calculate the equilibrium level of income in the economy in the 2022
financial year.
b) i)
ii) Calculate the amount of income tax received by the government and
hence explain whether there is a budget surplus or deficit.
c) The government decides to replace the planned government spending of
$117 million with a commitment to set government spending equal to tax
revenues (a balanced budget) with the tax rate increased to 15% of
national income. Write down the aggregate demand function in this case
and hence determine the new equilibrium level of income.
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