Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. PRICE LEVEL 130 20 120 110 100 90 80 Aggregate Demand 70 + + 0 10 20 30 OUTPUT 40 50 60 Aggregate Demand ? Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy Y is 0.85 and the MPC in economy Z is 0.8. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the

Changes in taxes The following graph plots an aggregate demand curve.   Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy.   Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy B is 0.7 and the MPC in economy A is 0.85. The economies are otherwise completely identical.   The tax cut will have a larger impact on aggregate demand in the economy with the (SMALLER MPC or LARGER MPC).

The following table provides some information on government spending (G) and tax revenues (T) at different levels of real GDP in a hypothetical economy. Note: Throughout this problem you can assume, for simplicity, that government transfers are zero. Real GDP (Billions of dollars) 460 GOVERNMENT SPENDING AND TAXES (Billions of dollars) 80 78 76 74 Use the blue line (circle symbols) to plot the government spending schedule presented in the table. Then use the orange line (square symbols) to plot the economy's tax revenues schedule. 72 70 68 → 68 64 62 + 60 500 540 400 420 Government Spending (G) (Billions of dollars) 72 440 72 72 460 480 500 520 540 REAL GDP (Billions of dollars) 560 Tax Revenues (T) (Billions of dollars) 70 580 72 74 600 404-8141 Deficits Surpluses ?

Imagine this economy has a 10% tax on income. The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 Now we have to take that tax into account.  Here is a way to think about it: Look at the consumption function.  It says if you give me one more dollar of income I will spend 80 cents of it (mpc = 0.8).  BUT I can only spend what I receive.  I can only spend my after-tax or disposable income.  With a 10% tax, I don't receive Y I receive 90% of Y or Y*(1-t) where t = 10% or 0.1.   Let's define disposable income as Yd where Yd = Y*(1-t).   Therefore we restate our consumption function as C = k + cYd   Now we have, in this case, C = k + cYd or C = 3 + 0.8Yd or C = 3 + 0.8*(Y*[1-0.1]) or C = 3 + 0.72Y. Now what is the equilibrium GDP? Give the answer to ONE decimal place.

Suppose the US Federal Government decides to increase its spending without issuing debt by raising additional taxes (i.e., tax-financed government spending). Create a graph that depicts the short-run and long-run effects of tax-financed government spending.

Suppose the MPC is 0.8. What is the tax multiplier in this economy? If the government were to lower taxes by $250 in this economy how much would Total Spending change as a result? Show your work.

According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively a. 0.99 and 1.59 b. 1.59 and 0.99 c. 1.3 and 1.7 d. 1.7 and 1.3

Which of the following statements is correct?     A decrease in the size of a tax always decreases the tax revenue raised by that tax.     A decrease in the size of a tax always decreases the deadweight loss of that tax.     Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.     An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

please assist with the following  Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25%Full employment level of income = 3575       Calculate total autonomus spending for economy X. Calculate the multiplier for economy X. Calculate the equilibrium income for the economy. Calculate the change in government spending required to reach (3) full employment level of income.

Suppose the government of a particular state has a large surplus, so the state's policymakers want to provide a large one-time tax cut (i.e., a decrease in taxes) sometime soon. In parts a.) - c.), show ( on a different graph for each part), how the tax cut under the given conditions would affect the equilibrium Price Level and GDP in the state (in parts b.) and c.), include any changes caused by the Self-Correcting Mechanism- i.e., assume the tax cut happens first, followed by any changes caused by the Self-Correcting Mechanism). a.) A tax cut when the economy exhibits a Recessionary Gap ( assume that the tax cut gets the economy back to the "Natural Rate of Output". So there will be no changes caused by the Self-Correcting Mechanism in this part) (1) b.) A tax cut when the economy is operating at the "Natural Rate of Output”. (1) c.) A tax cut when the economy exhibits an Inflationary Gap. (1) d.) In which of the 3 cases above does the macroeconomy have the LEAST inflation (just list…