Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C= 250 + 0.80(Y -T) Suppose further that investment spending is fixed at I = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = 2700. (Round your response to two decimal places.) C= 2250. (Round your response to two decimal places.) S= 250 (Round your response to two decimal places.) Now, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 20 to a new fixed level of 180. Determine the value of the tax multiplier. Tax multiplier = O (Round your response to two decimal places and include a minus sign if necessary.) Solve for equilibrium levels of Y, C, and S after the tax cut and check to ensure that the multiplier worked. Y =D (Round your response to two decimal places.) C = (Round your response to two decimal places.) S = (Round your response to two decimal places.)

Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C= 250 + 0.80(Y -T) Suppose further that investment spending is fixed at I = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = 2700. (Round your response to two decimal places.) C= 2250. (Round your response to two decimal places.) S= 250 (Round your response to two decimal places.) Now, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 20 to a new fixed level of 180. Determine the value of the tax multiplier. Tax multiplier = O (Round your response to two decimal places and include a minus sign if necessary.) Solve for equilibrium levels of Y, C, and S after the tax cut and check to ensure that the multiplier worked. Y =D (Round your response to two decimal places.) C = (Round your response to two decimal places.) S = (Round your response to two decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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