Continuing the situation in the above question (i.e. suppose the economy begins in a long-run equlibrium at potential output when the government decides to alter speand/or taxes to make the budget deficit smaller). What would be the long-run impact of this action?000unemployment and investment spending are unchangedunemployment is higher and investment spending is unchangedUnemployment is unchanged, but there is more investment spendingunemployment is higher and there is less investment spending

Explanation:Reducing the budget deficit can be achieved through two main methods:Decreasing Spending…

Answered: Continuing the situation in the above…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q: "Introducing Keynesian Economics" says that Keynes A: - wanted social revolution just like Marx - aggregrate supply is determined by the level of aggregrate demand, the level of aggregrate demand deternines level of employment - aggregrate supply determines aggregrate demand and the market always gives full-employment equilibrium - all of the above
I. Taiwan has an income tax rate, t1, of 28% and a Marginal Propensity to Save (MPS) of 0.4. It is in Eqm but is currently suffering from an "inflationary gap" of $350 m. (that is, Eqm Y>Y full employment, FE, aka Yn). Make the necessary calculations for the to policy that should be instituted. Provide the full name of this policy. II. Most economists believe that tariffs are not the best way to reduce the US trade-balance deficit -- the fact that US IM>US X. (Macro problems should be fixed with macro tools and tariffs are a micro tool.) Derive the identity for Y from the expenditure approach for an open economy to discuss what it means when a country is running a trade-balance deficit and whether it is an economic "good" or "bad." Then derive the twin-deficit identity and use it to explain why the US runs trade-balance deficits and what can be done, if anything, to reduce them. Make all your assumptions clear.
. Find the equilibrium level of national income in the basic Keynesian macroeconomic model: Y=C+I+G C=20+0.75Yd Yd=(1-t)Y
With reference to an Injections and Withdrawals diagram. If this diagram is illustrating a Recessionary Gap. Using Macroeconomic terms explain what this diagram is outlining and what measures a Government may take to correct this economic situation, and why Government may take these actions. You may wish to include a brief analysis relating to current macroeconomic issues
Question 13 Include correctly labeled diagrams, if useful or required, In explaining your answers. A correctly labeled dl question prompts you to 'Calculate," you must show how you arrived at your final answer. Vander's economy is in short-run equilibrium with an inflationary gap of $360 billion, and the marginal propensity to save 0.1. the expected inflation rate is 2% and the natural rate of unemployment is 4% (b) Assume the government takes no policy action with regard to the state of Vander's economy. (i) What will happen to the actual rate of unemployment in the long run? Explain.(it) The flow will the long-run adjustment process be represented in the Phillips curve model? Explain. (c) Assume that instead of waiting for the long-run adjustment, the government of Vander is considering USA fiscal policy to addresses the inflationary gap of 360 billion(ii) How will the effect of the government's action in part (c)(i) be represented in the Phillips curve model(Ili) If the government…
5
Suppose that the government reduces the lump-sum tax, and suppose that gov- ernment always has a balanced budget: G = T. Using a diagram, describe and explain the effects of this policy on aggregate output, consumption, employment (or hours worked), and the real wage (note: show the effects on a graph with the production possibilities frontier and indifference curves).
What type of output gap occurs when the economy is below full employment? The economy is below full employment. Draw the aggregate demand curve. Label it AD. Draw a point at the equilibrium. C 140- 130- Price level (GDP price index, 2012-100) 120- 110- 100- 90- 90 80- 18.0 Potential GDP AS ☑ 18.5 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Real GDP (trillions of 2012 dollars) >>> Draw only the objects specified in the question.
Price level 110 105 100 96 1 AS Ful employment. AD₂ AD₁ 50 51 Real GDP (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by: A increasing government tax revenue by approximately $33 billion. B decreasing government tax revenue by $100 billion. increasing government tax revenue by $100 billion. decreasing government tax revenue by $750 billion. decreasing government tax revenue by approximately $33 billion.
2. Consider a Keynesian IS-LM model for national income: Y=C(Y-T) + I (r) + G L (r,Y)= M³ (b) IS: LM: where we consider Y and r as the endogenous variables and G, M³, and T as the exogenous variables. Find the effect of a lump-sum tax, T, change on r, i.e., Or/T, using the implicit function theorem.
3. Graphically illustrate the Keynesian Model, show the equilibrium level of GDP (label it Ye) and the full employment level of GDP (label it Yf).
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