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(a) Consider a closed economy model below: C = Co + C₁Yd; yd = Y-T; where (i) (ii) (iii) T=To I= bo + bịY; G = 90 +9₁Y. solve for the equilibrium income. solve for the tax multiplier. determine the government expenditure multiplier

(a) Consider a closed economy model below: C = Co + C₁Yd; yd = Y-T; where (i) (ii) (iii) T=To I= bo + bịY; G = 90 +9₁Y. solve for the equilibrium income. solve for the tax multiplier. determine the government expenditure multiplier

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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3. TRUE Consider a closed economy model below: C = Co + C₁Yd; yd = Y-T; (c) (d) where (i) (ii) (iii) T = To I= bo + bịY; G = go + 9₁Y. solve for the equilibrium incomė. solve for the tax multiplier. determine the government expenditure multiplier (b) In the simple Keynesian model, an increase of Ghel in autonomous expenditure will cause equilibrium income to increase by a multiple of this Ghcl increase. Explain the process by which this happens. IR With the help of a diagram, explain the Paradox of Thrift. sing another diagram, show how an increase in savings can lead to an increase in equilibrium national income when the assumption of constant interest rates in the Keynesian model is relaxed? of 2
Transcribed Image Text:3. TRUE Consider a closed economy model below: C = Co + C₁Yd; yd = Y-T; (c) (d) where (i) (ii) (iii) T = To I= bo + bịY; G = go + 9₁Y. solve for the equilibrium incomė. solve for the tax multiplier. determine the government expenditure multiplier (b) In the simple Keynesian model, an increase of Ghel in autonomous expenditure will cause equilibrium income to increase by a multiple of this Ghcl increase. Explain the process by which this happens. IR With the help of a diagram, explain the Paradox of Thrift. sing another diagram, show how an increase in savings can lead to an increase in equilibrium national income when the assumption of constant interest rates in the Keynesian model is relaxed? of 2
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