Given the following model for an economy C = 100 + 0.8Yd G = 800 T = 500 I = 200 d) Find Tax multiplier. e) Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100). f) Find the new level of output if the government spending is increased by 100 and this government expenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).
Given the following model for an economy C = 100 + 0.8Yd G = 800 T = 500 I = 200 d) Find Tax multiplier. e) Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100). f) Find the new level of output if the government spending is increased by 100 and this government expenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Question: Given the following model for an economy
C = 100 + 0.8Yd
G = 800
T = 500
I = 200
d) Find Tax multiplier.
e) Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100).
f) Find the new level of output if the government spending is increased by 100 and this government expenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).
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