a) Write the equation representing snapshot of budget and Indicate the status of the budget as having a surplus or deficit, or balanced at Zero and explain why? How is this budget expected to affect the GDP? Explain! (b) Use the lump-sum tax and the MPC to calculate the decrease in consumption due to this lump sum tax (show all your calculations); then use the change in consumption you just obtained to find the consumption after tax (ca-fill in the column 7 below). (c) Use the Ca to find the (after-tax) aggregate expenditures for the 4-sector private-public-open economy (AEa) and fill in the column 8; Now use the column 1 and column 8 to find the new equilibrium GDP and DI in the 4-sector model. (d) Has GDP increased in the 4-sector compared with those in the previous 3-sector equilibrium? If so, by how much? What is the effective multiplier from 3-sector to 4-sector and why? Explain. (e) Has DI changed from 3-sector to 4-sector? Why/why not? How about consumption and savings? Explain your answer. (f) Show the 3-sector and the 4-sector equilibrium on the same graph. (g). use the Tax multiplier to calculate the change in GDP when there is a decrease of $50 in taxes?
- a) Write the equation representing snapshot of budget and Indicate the status of the budget as having a surplus or deficit, or balanced at Zero and explain why? How is this budget expected to affect the
GDP ? Explain!
(b) Use the lump-sum tax and the MPC to calculate the decrease in consumption due to this lump sum tax (show all your calculations); then use the change in consumption you just obtained to find the consumption after tax (ca-fill in the column 7 below).
(c) Use the Ca to find the (after-tax) aggregate expenditures for the 4-sector private-public-open economy (AEa) and fill in the column 8; Now use the column 1 and column 8 to find the new equilibrium GDP and DI in the 4-sector model.
(d) Has GDP increased in the 4-sector compared with those in the previous 3-sector equilibrium? If so, by how much? What is the effective multiplier from 3-sector to 4-sector and why? Explain.
(e) Has DI changed from 3-sector to 4-sector? Why/why not? How about consumption and savings? Explain your answer.
(f) Show the 3-sector and the 4-sector equilibrium on the same graph.
(g). use the Tax multiplier to calculate the change in GDP when there is a decrease of $50 in taxes?
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