An economy is described by the equations: C 20 + 0.8YD, G = 40, X = 50 – 2P, I = 18, T = 10, M = 0.04Y + 2P, AS = 2.5P, t = 0.20. a .Provide two fully labeled diagrams for AS/ AD and NS/NAF and supplementary calculations to illustrate how this economy would respond if the income tax (direct tax) was to be reduced to10 percent. b. Explain how the change in tax revenues would differ if this was a fixed price economy. %3D

An economy is described by the equations: C 20 + 0.8YD, G = 40, X = 50 – 2P, I = 18, T = 10, M = 0.04Y + 2P, AS = 2.5P, t = 0.20. a .Provide two fully labeled diagrams for AS/ AD and NS/NAF and supplementary calculations to illustrate how this economy would respond if the income tax (direct tax) was to be reduced to10 percent. b. Explain how the change in tax revenues would differ if this was a fixed price economy. %3D

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

An economy is described by the equations: C
= 20 + 0.8YD, G = 40, X = 50 – 2P, I = 18, T =
10, M = 0.04Y + 2P, AS = 2.5P, t = 0.20. a
.Provide two fully labeled diagrams for AS/ AD
and NS/NAF and supplementary calculations
to illustrate how this economy would respond
if the income tax (direct tax) was to be
reduced to10 percent. b. Explain how the
change in tax revenues would differ if this was
a fixed price economy.
||
-
||

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