Question: Solve for the equilibrium level of output in the following two scenarios: there isan income tax t=0.1, The income tax would result in the total amount of tax to be the lump sum tax and the income tax rate on income when t=0.1t=0.1 Y=−5+0.5(Y−250−0.1Y)+200+300+50' =−5+0.5(0.9Y−250)+550 =−5+0.45Y−125+550 =0.45Y−420 0.55Y=420Y=420 0.55=763.636≅763.64 Please explain this solution. Where does the 0.45Y come from?
Question: Solve for the equilibrium level of output in the following two scenarios: there isan income tax t=0.1, The income tax would result in the total amount of tax to be the lump sum tax and the income tax rate on income when t=0.1t=0.1 Y=−5+0.5(Y−250−0.1Y)+200+300+50' =−5+0.5(0.9Y−250)+550 =−5+0.45Y−125+550 =0.45Y−420 0.55Y=420Y=420 0.55=763.636≅763.64 Please explain this solution. Where does the 0.45Y come from?
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter11: Fiscal Policy And The Federal Budget
Section: Chapter Questions
Problem 4WNG
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Question: Solve for the equilibrium level of output in the following two scenarios:
- there isan income tax t=0.1,
The income tax would result in the total amount of tax to be the lump sum tax and the income tax rate on income when t=0.1t=0.1
Y=−5+0.5(Y−250−0.1Y)+200+300+50'
=−5+0.5(0.9Y−250)+550
=−5+0.45Y−125+550
=0.45Y−420
0.55Y=420Y=420
0.55=763.636≅763.64
Please explain this solution. Where does the 0.45Y come from?
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