Suppose a government is established in a country where none previously existed. The government spends 110, financed by borrowing, to provide public services. If autonomous consumption, investment and exports minus autonomous imports is 210, MPC is 0.65 and MPM is 0.15, what are the equilibrium real GDP values before and after the government is established? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. a) What is the equilibrium real GDP value before the government is established? Yo = 0 b) What is the equilibrium real GDP value after the government is established? Y₁ = 0 c) Now suppose the government expenditure was financed by imposing a net tax rate on income of t = 0.15, what equilibrium real GDP would result? Y₂ = 0 d) What is the multiplier before the tax is imposed? Multiplier before tax = 0 e) What is the multiplier after the tax is imposed? Multiplier after tax = 0

Suppose a government is established in a country where none previously existed. The government spends 110, financed by borrowing, to provide public services. If autonomous consumption, investment and exports minus autonomous imports is 210, MPC is 0.65 and MPM is 0.15, what are the equilibrium real GDP values before and after the government is established? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. a) What is the equilibrium real GDP value before the government is established? Yo = 0 b) What is the equilibrium real GDP value after the government is established? Y₁ = 0 c) Now suppose the government expenditure was financed by imposing a net tax rate on income of t = 0.15, what equilibrium real GDP would result? Y₂ = 0 d) What is the multiplier before the tax is imposed? Multiplier before tax = 0 e) What is the multiplier after the tax is imposed? Multiplier after tax = 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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