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- Suppose the government of a particular state has a large surplus, so the state's policymakers want to provide a large one-time tax cut (i.e., a decrease in taxes) sometime soon. In parts a.) - c.), show ( on a different graph for each part), how the tax cut under the given conditions would affect the equilibrium Price Level and GDP in the state (in parts b.) and c.), include any changes caused by the Self-Correcting Mechanism- i.e., assume the tax cut happens first, followed by any changes caused by the Self-Correcting Mechanism). a.) A tax cut when the economy exhibits a Recessionary Gap ( assume that the tax cut gets the economy back to the "Natural Rate of Output". So there will be no changes caused by the Self-Correcting Mechanism in this part) (1) b.) A tax cut when the economy is operating at the "Natural Rate of Output”. (1) c.) A tax cut when the economy exhibits an Inflationary Gap. (1) d.) In which of the 3 cases above does the macroeconomy have the LEAST inflation (just list…Suppose that the components of planned spending in an economy are C-500 +0.8(Y-T), I-1500, G-2000, X=0, T=0.25Y, where t is the fraction of income paid in taxés (the tax rate). As we will see in this problem, a tax system of this sort serves as an automatic stabiliser, because taxes collected automatically fall when incomes fall. a) Find a short-run equilibrium output in this economy. b) Calculate the multiplier, c) Explain how reducing the size of the multiplier helps to stabilise the economy, holding constant the typical size of fluctuations in the components of exogenous expenditure.Q1: There are two equations for macroeconomic equilibrium in an economy. State them. Show (mathematically) that Savings equals Investment when expenditure equals income. What type of economy would you have when exports equal imports? What happens to the savings-investment relationship if exports are not equal to imports? [This can be greater than or less than]. [Hint: See video lecture on Open Economy Macroeconomics]. Note: Ensure to write out full meanings when you use abbreviations or short forms. This is key to getting full marks.
- When the economy is out of general equilibrium, which of the three curves (FE, IS, LM) shifts to return the economy to general equilibrium? What causes this curve to shift?True or False? In the long-run general equilibrium, MPK = MPL.Q2. The economy is originally at S and D levels for supply and demand. Explain the effects on the economy when the income declines and there are technological innovations. Where will supply and demand curves shift? (S, or S2 and D; or D2). Why? Explanation: 51 SE 52 02 DE monsteR
- How can a reduction in Corporation Tax lead to supply side improvements in an economy?. You are given the following data concerning Freedonia, a new republic. 1) Consumption is 200 when income is zero and the marginal propensity to consume is 0.6 out of every dollar increase in income 2) Investment function: I = 200 3) AE ≡ C + I 4) AE = Y A. Derive the savings function? B. Suppose equation 2) is changed to I = 150. What is the new equilibrium level of income (Y)? By how much does the $50 decrease in planned investment change equilibrium income? What is the value of the tax multiplier? C. Plot the savings function from a. on a graph with equation 2).Q)government has decided to rise its overall taxes. Which effect might it cause in the Spanish economy based on the good market equilibrium ? -Private savings increases -Trade balance worsens -trade balance improves - output rises
- CANBERRA, AUSTRALIA - Australia's prime minister achieved an important political victory on Thursday when the Senate passed personal income tax cuts worth 144 billion Australian dollars ($106 billion) over a decade. The tax cuts for most of Australia's workforce were a centerpiece of Prime Minister Malcolm Turnbull's annual budget plans revealed in May. That budget is expected to be the last before Turnbull's conservative coalition seeks another three-year term at elections due by early next year. The center-left opposition Labor Party supported the proposed initial tax relief for low- and middle-income earners beginning next month. But it opposed a third and a final stage of the plan that reduces taxes of those with incomes from AU$120,000 to AU$200,000 beginning in mid-2024. Turnbull on Wednesday refused to split the legislation so that the Senate could reduce taxes for those on lower incomes but not for higher-income earners. The Senate had to pass or reject the changes in their…An economy has the following characteristics: Y = National income Taxes = T = 0.25Y C = Consumption = 400+ 0.85(Y – T) 1 = 300 G = 200 (Exports) X = 500 (Imports) M = 0.1(Y – T) Find the equilibrium for this economy. If potential GDP is 3,500, then what change in government spending is needed to achieve this level? Do this problem two ways. Either plug 3,500 into the equations and solve for G, or calculate the multiplier and figure it out that way.LRAS, LRAS₂2 A. B. C. D. E. A B C E D LL AD₁ SRAS₁ W SRAS2 AD2 Real GDP (Y) Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D? The population has aged and there are fewer people in the labor force. Firms and workers expected the price level to rise. The economy experienced an increase in government spending. The economy was in an expansion and has adjusted. The country's overall productivity increased.