Suppose that government is included in the short-run model of national income, where the level of government expenditure is $100 billionand the net tax rate is 50%.Use the line drawing tool to draw and properly label the budget balance function on the graph at right. Make sure that the line extends fromActual National Income level 0 to 1000.Carefully follow the instructions above, and only draw the required objects.Budget Balance ($ billions)The Budget Balance Function480-440-400-360-320-280-240-200-160-1208040-어-40-200400-6008001000-80--120--160--200-Actual National Income ($ billions)

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Answered: Suppose that government is included in…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

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The US government has recently announced and started to implement a large-scale fiscal expansion to mitigate the negative effects of the coronavirus pandemic and reboot the US economy. The Biden administration argued that this fiscal stimulus policy can rapidly accelerate the economic recovery without triggering high levels of inflation. Suppose the US fiscal stimulus can increase the US aggregate output level. possible effect of this fiscal policy on output and on the trade balance of European countries. And which graph can I use
6. Graphical treatment of taxes and fiscal policy The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes do not vary with GDP The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. Hint: The new consumption schedule must pass through one point on the left and one point on the right. 50 Consumption with Tax Increase through a Fixed Tax Consumption with Tax Increase through a Variable Tax + 20 40 60 80 100 REAL GDP (Billions of dollars) The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new…
8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C = 15+0.75 x (Y-T) Suppose G = $90 billion, 1 = $60 billion, and T = $20 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y=C+I+G, the equilibrium output level is equal to 5 billion. Suppose the government purchases are increased by $50 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to
8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C = 20+0.75 x (Y-T) Suppose G = $35 billion, I = $60 billion, and T = $20 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y = C + I + G, the equilibrium output level is equal to $ billion. Suppose the government purchases are increased by $50 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to
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explanation. Be sure to exp Assume the United States has been in another recession for the past 10 months. Unemployment is 10% and GDP has dropped $1.9 trillion from its previous peak of $ 20.8 trillion. The housing and heavy equipment industries have been hit the hardest. Inflation has been near the 2% target but has started to dip below. Also, the countries average MPC is 60. Determine the best fiscal policy/strategy to help the economy recover and explain why it is the best choice. Be sure to reference Aggregate Demand and Aggregate Supply and explain your specific tools in your answers. Calculations Explanation Graph (More space for the explanation on the back)
5. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, / is investment, G is government purchases, and T is for net taxes: C 40+0.5x (Y-T) Suppose G $265 billion, 7- $50 billion, and T $10 billion. Given the consumption function and the fact that, in a closed economy, total expenditure can be calculated as Y = C+I+G, the equilibrium output level is s billion. Suppose the government purchases are reduced by $100 billion. The new equilibrium level of output will be equal to s billion. Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to
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Overall Price Level 49 43 32 19 AD2 AS O Increase government spending: $19 O Increase taxes; $26 O increase taxes; $19 O Increase government spending; $29 AD 26 29 Real GDP Please refer to the graph above. Assume we begin in equilibrium at ADO and AS. Ceteris paribus, which fiscal policy will lead to which initial real GDP?
Directions: click on the graph in the window on the right and select Time Series to graph the U.S. public (federal) net outstanding debt as a percentage of GDP for the years 1940-2005. For Y Axis1 select Net Federal Debt, percentage of GDP. Use the figure to help determine which of the following statements are true. O A. The U.S. net federal debt to GDP ratio has been, for the most part, decreasing since the end of World War II, despite the fact that the U.S. economy was expanding and could afford a larger debt to GDP ratio. OB. As a result of the exceptionally large increases in U.S. government military expenditures in the first half of the 1940's, that were needed to win World War II, the net U.S. public debt to GDP ratio increased substantially, surpassing 100%. Since the late 1950's however, U.S. net federal debt to GDP ratio has fluctuated within a relatively small bend around the 40% line. OC. The net U.S. federal debt to GDP ratio follows a pattern that cannot have a meaningful…
The table below shows hypothectical figures of revenue and spending for the Canadian government. For simplicity, assume that all of the spending grants to other levels of government were spent in Canada on goods and services. REVENUES Personal income taxes Corporate income taxes $120 28 2 48 18 Other revenues 21 Total Revenues 237 a. The projected NTR in this budget plan is $ b. The value of NTR less government spending on goods and services (G) is $ Round your answers to 1 decimal place. c. The percentage of total revenue made up by personal income taxes is d. The percentage of total revenue made up by corporate income taxes is e. The percentage of total outlays made up by transfer payments to persons is f. The percentage of total outlays made up by public debt charges is Federal Government's Budget Plan for Fiscal Year ($billion) OUTLAYS Other income taxes GST and excise taxes EI premiums Transfers to persons Spending grants to other levels of government Public debt charges Direct…

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