n economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY Where t denotes the marginal tax rate. Suppose potential GDP is Y* = 10,000. What marginal tax rate t would restore GDP to potential? a.0 b.0.1 c.0.2 d.0.3

n economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY Where t denotes the marginal tax rate. Suppose potential GDP is Y* = 10,000. What marginal tax rate t would restore GDP to potential? a.0 b.0.1 c.0.2 d.0.3

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 6E

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Question

An economy is described by the following equations:

C = 1600 + 0.8(Y – T)

I = 1000

G = 1800

T = 3000 + tY

Where t denotes the marginal tax rate. Suppose potential GDP is Y* = 10,000. What marginal tax rate t would restore GDP to potential?

a.0

b.0.1

c.0.2

d.0.3

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