We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T), consumption function C(Ya), planned investment function I(r), government spending G, and taxation T = tY where t is the marginal tax rate; r% denotes the real interest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interest rate is 2%. When doing calculations, the interest rate should not simply be inserted in decimal form. For example, if r = 2 then I(2) = 124 – 2 = 122.) Consider a hypothetical economy where: • (Ya) = 12 + 0.75 × (Y – T) • I(r) = 124 – 1 × r • G = 120 • t = 20%

We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T), consumption function C(Ya), planned investment function I(r), government spending G, and taxation T = tY where t is the marginal tax rate; r% denotes the real interest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interest rate is 2%. When doing calculations, the interest rate should not simply be inserted in decimal form. For example, if r = 2 then I(2) = 124 – 2 = 122.) Consider a hypothetical economy where: • (Ya) = 12 + 0.75 × (Y – T) • I(r) = 124 – 1 × r • G = 120 • t = 20%

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 7SQ

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Question

first image is just the resource. second image has the questions 6,7 and 8

* also note This economy’s central bank follows a
given Monetary Policy Rule: r = i = 0.025 × Y + 0.0003 × P , where P is the price
level.

6. Suppose that the price level (P) falls to 500. What is the equilibrium value of
aggregate income, Y?
7. What are the new equilibrium values of the interest rate, r, and investment, I?
8. Discuss why the change in the price level has the identified impacts on Y, r and I.

We use the following terminology in this part: aggregate income Y and disposable income
Ya (= Y –T), consumption function C(Ya), planned investment function I(r), government
spending G, and taxation T = tY where t is the marginal tax rate; r% denotes the real
interest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interest
rate is 2%. When doing calculations, the interest rate should not simply be inserted in
decimal form. For example, if r = 2 then I(2) = 124 – 2 = 122.)
Consider a hypothetical economy where:
• C(Ya) = 12 + 0.75 × (Y – T)
• I(r) = 124 – 1 × r
• G = 120
• t = 20%

Definition Definition Policy implemented by the central bank of a country (such as the Federal Reserve in the United States) to achieve certain macroeconomic objectives. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.

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first image is a resource for the question in the second image. Thank you so much! :)
first picture is just a resource for the question in the second picture thank you so much! :)
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