C = 600 + 0.8Yd , Yd = Y – T, Tg = 100, I= 200, R = 50, G = 350, X = 250 and M = 200 + 0.1Y. How much tax has to be reduced so that the national income will increase by 2000? Based on the answer in Question 2(a), if the government undertakes expansionary fiscal policy by increasing government expenditure by 400, calculate the new equilibrium level of income. After being at the equilibrium level of income in Question 2(e) above, if the government reduces the tax by 400, what is the new equilibrium level of income?
C = 600 + 0.8Yd , Yd = Y – T, Tg = 100, I= 200, R = 50, G = 350,
X = 250 and M = 200 + 0.1Y.
How much tax has to be reduced so that the national income will increase by
2000?
Based on the answer in Question 2(a), if the government undertakes
expansionary fiscal policy by increasing government expenditure by 400,
calculate the new equilibrium level of income.
After being at the equilibrium level of income in Question 2(e) above, if the
government reduces the tax by 400, what is the new equilibrium level of
income?
Starting with the original information above, if the government runs a
balanced budget i.e. increases the government expenditure and tax by the
same amount (ΔG = ΔT = 400 which Δ means changes), calculate the new
equilibrium level of income. Draw a diagram to show this situation
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