Question

In: Economics

c = 100 + 0.8 (y - t) i = 500 - 50r g = 400...

c = 100 + 0.8 (y - t)

i = 500 - 50r

g = 400

t = 400

Md = P(0.2y + 500 – 25r)

Price level is fixed at 1.

The money supply is 520

  1. The government increases taxes by one unit.
  1. Calculate the shift of the IS curve.
  2. What is the change in the level of aggregate demand?
  3. What is the change in the interest rate and investment?
  4. What is the change in disposable income and consumer expenditure?
    e. What is the change in the government’s budget balance?

Solutions

Expert Solution

Rahul Sunny answered 7 months ago
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