EBK MACROECONOMICS
12th Edition
ISBN: 8220100663307
Author: PARKIN
Publisher: PEARSON
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Chapter 13, Problem 13APA
To determine
Estimate the value of tax revenue and government budget balance.
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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…
The budget balance is
$
enter your response here
trillion.
>>>
Answer to 1 decimal place. If your answer is negative, include a minus sign. Do not include a plus sign.
2. Calculating the debt to GDP ratio
Suppose the following statistics characterize the financial health of the hypothetical economy Splurgium at the end of 2017:
Gross domestic product (GDP) is equal to $160 billion.
• The national debt is equal to $240 billion.
• The government has a budget deficit of $8 billion.
The debt ceiling in Splurgium is set at $264 billion.
The following calculations help you see how the ratio of debt to GDP changes from one year to the next.
Complete the first row of the following table by computing the ratio of national debt to GDP.
Suppose that nominal GDP remains at $160 billion in 2018, and again the government runs a budget deficit of $8 billion. For simplicity, assume the
interest rate on the national debt is 0%, and no payments are being made to reduce the debt.
Calculate national debt and the debt-to-GDP ratio in 2018. Enter these values in the second row of the following table.
GDP
National Debt
(Billions of dollars) (Billions of dollars) Ratio of…
Chapter 13 Solutions
EBK MACROECONOMICS
Ch. 13.1 - Prob. 1RQCh. 13.1 - Prob. 2RQCh. 13.1 - Prob. 3RQCh. 13.1 - Prob. 4RQCh. 13.1 - Prob. 5RQCh. 13.2 - Prob. 1RQCh. 13.2 - Prob. 2RQCh. 13.2 - Prob. 3RQCh. 13.2 - Prob. 4RQCh. 13.2 - Prob. 5RQ
Ch. 13.3 - Prob. 1RQCh. 13.3 - Prob. 2RQCh. 13.3 - Prob. 3RQCh. 13.3 - Prob. 4RQCh. 13.3 - Prob. 5RQCh. 13.4 - Prob. 1RQCh. 13.4 - Prob. 2RQCh. 13.4 - Prob. 3RQCh. 13.4 - Prob. 4RQCh. 13.4 - Prob. 5RQCh. 13 - Prob. 1SPACh. 13 - Prob. 2SPACh. 13 - Prob. 3SPACh. 13 - Prob. 4SPACh. 13 - Prob. 5SPACh. 13 - Prob. 6SPACh. 13 - Prob. 7SPACh. 13 - Prob. 8SPACh. 13 - Prob. 9SPACh. 13 - Prob. 10SPACh. 13 - Prob. 11SPACh. 13 - Prob. 12APACh. 13 - Prob. 13APACh. 13 - Prob. 14APACh. 13 - Prob. 15APACh. 13 - Prob. 16APACh. 13 - Prob. 17APACh. 13 - Prob. 18APACh. 13 - Prob. 19APACh. 13 - Prob. 20APACh. 13 - Prob. 21APACh. 13 - Prob. 22APACh. 13 - Prob. 23APACh. 13 - Prob. 24APACh. 13 - Prob. 25APACh. 13 - Prob. 26APACh. 13 - Prob. 27APACh. 13 - Prob. 28APA
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- 3arrow_forward6. Graphical treatment of taxes and fiscal policy The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes 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. REAL CONSUMER SPENDING (Billions of dollars) 8 40 30 8 0 + + + O + ++ 20 40 60 REAL GDP (Billions of dollars) 80 + O + 100 Consumption with Tax Increase through a Fixed Tax Consumption with Tax Increase through a Variable Tax 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 consumption line you just plotted to calculate the new…arrow_forward7. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (ADI). Suppose now that the government increases its purchases by $2.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can see the slope of AD₁ by selecting it on the following graph. PRICE LEVEL 116 114 112 10 110 108 106 104 102 AD₂ AD AD3 100 100 102 104 106 108 110 112 114 116 OUTPUT (Billions of dollars)arrow_forward
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