Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 29, Problem 3.2P
Sub part (a):
To determine
Equilibrium income and government deficit.
Sub part (b):
To determine
New value of equilibrium
Sub part (c):
To determine
New value of GDP and new value of government budget deficit.
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Students have asked these similar questions
Data is provided below for a small closed economy.
Output/Income = 10,000
Consumption = 600 + 0.75(Y - T)
Investment = 400
Taxes = 2,000
Government expenditure = 2,000
Assuming that fiscal policy has a multiplier effect and that investment and taxes remain unchanged, what will happen to output if government expenditure decreased by 500?
Select one:
It would increase by 500
It would decrease by 667
It would decrease by 500
It would increase by 2,000
It would decrease by 2,000
It would increase by 667
Assuming you are the Minister of Finance and Economic Planning for Nigeria, in charge of Fiscal Policy. The Research Director of the Ministry brought you the following data on Nigeria’s for the previous fiscal year, 2021.
An examination of the data reveals that, during the fiscal year 2021, households in Nigeria saved 20% of their disposable income (Yd) and spent the rest on consumption. In addition, ₦5,000.00 was spent on Consumption expenditure (C), which is independent of income and Gross Private Investment (I) was ₦ 7,000.00. Total Government expenditure (G) which stood at ₦8,000.00 was supposed to be financed by a lump sum tax of ₦2,000.00 (independent of income) and a proportional tax rate of 25% of national income. Exports (X) stood at ₦2,500.00. In addition, the country’s import (M) during the previous fiscal year comprises of ₦1,000.00 which was independent of the country’s national income and 10% which was dependent of the country’s national income. Given these data on…
Consider the following information for a country:
Consumption Function: C = 100+ 0.8Yd
Investment Function: I = 100
Government Spending: G = 150
Net Taxes:
T=
40 +0.25Y
Disposable Income:
Equilibrium:
The level of equilibrium income, Y, = $
The amount of taxes collected by the government at equilibrium, T, = $
rounded to two decimal places.)
Yd=Y-T
Y=C+I+G
(Enter your response rounded to two decimal places.)
(Enter your response
The budget deficit at equilibrium, (G-T), = $
and include a minus sign if necessary.)
.
(Enter your response rounded to two decimal places
Chapter 29 Solutions
Principles of Economics (12th Edition)
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