Interest rate, r P₁ r2, Y2. r3, Y₂. r2, Y3. r1, Y₂. LM Y₂ Income, Output, Y Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in government spending would generate the new equilibrium combination of interest rate and income: Y₁ Y3 IS₂ IS₁ IS₂

Interest rate, r P₁ r2, Y2. r3, Y₂. r2, Y3. r1, Y₂. LM Y₂ Income, Output, Y Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in government spending would generate the new equilibrium combination of interest rate and income: Y₁ Y3 IS₂ IS₁ IS₂

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150 a. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. b. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?
Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 9 Tax Revenue a∞rontm ~ - X 8 7 6 5 4 3 2 1 A B Refer to Figure 8-24. Tax revenue would [I B. All of the above are correct. A. decrease if the economy began at point C and then the tax rate was increased. Answer Key:B Tax Size OC. decrease if the economy began at point B and then the tax rate was decreased. D. increase if the economy began at point F and then the tax rate was decreased.
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Question 5/ 25 If government spending decreased by $500. Given that c= 100+0.75y and the initial income is S5000, the new equilibrium income is: 1. O$7000 2. Os1600 3. O$3000 4. Os6600
Aggregate expenditure (billions of 2007 dollars) 375 347 150 100 10 0 100 200 45° line AE C 300 375 Real GDP (billions of 2007 dollars) 6. Using the graph above, assume there are no taxes in this economy. Answer the following questions: a. MPC = b. MPM = C. MP to Spend = =Z= d. AE Function = e. Multiplier = f. Equilibrium level of Real GDP is
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Consider the economy of Citronia, where citizens consume only oranges. Assume that oranges are priced at $1 each. The government has devised the following tax plans: Plan A • Consumption up to 1,000 oranges is taxed at 5%. • Consumption higher than 1,000 oranges is taxed at 50%. . Use the Plan A and Plan B tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 500 oranges, 1,800 oranges, and 3,000 oranges, respectively. Consumption Level (Quantity of oranges) 88°F Sunny 500 1,800 3,000 F2 @ 2 Marginal Tax Rate (Percent) Complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system. F3 70 Q+ Plan A # 3 F4 Average Tax Rate (Percent) Plan B • Consumption up to 2,000 oranges is taxed at 45%. • Consumption higher than 2,000 oranges is taxed at 15%. $ 4 F5 Plan B Marginal Tax Rate (Percent) % 5 F6 F7 Average Tax Rate (Percent)…
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29. Given this model, what is the equilibrium level of income?
Consider an economy that is described by the following: C = 500 + 0.75Yd I = 100 G = 100 T = 100 a. Derive the equilibrium level of income b. Derive the effects of a PhP 10 increase in government spending on equilibrium income c. Derive the effects of a PhP 10 increase in income taxes on equilibrium income.