Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242500
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21, Problem 8PA
Subpart (a):
To determine
The initial effect of tax reduction on aggregate
Subpart (b):
To determine
The total effects of tax reduction on aggregate demand.
Subpart (c):
To determine
The comparison of total effects of tax reduction to the total effects of increase in Government purchases.
Subpart (d):
To determine
How can the Government increase aggregate demand without changing the government’s budget deficit.
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(d) Calculate the total change in qı.
Total change:
007
(sp) S
to vlijnsi
(e) B₁ is our original budget constraint and B2 is our new budget constraint after the price of good 1 (p1) increased.
Decompose the change in qı (that occurred from the increase in p₁) into the income and substitution effects. It
is okay to estimate as needed via visual inspection. Add any necessary information to the graph to support your
03
answer.
Substitution Effect:
Income Effect:
everything is in image (8 and 10) there are two images each separate questions
everything is in the picture (13)
the first blank has the options (an equilibrium or a surplus)
the second blank has the options (a surplus or a shortage)
Chapter 21 Solutions
Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
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