In Macro Model #3 with government spending and taxation, suppose that the household consumption function is...

In Macro Model #3 with government spending and taxation, suppose that the household consumption function is given by C Y = + 100 .75 , desired investment and government spending by 100 each, and taxes by T T tY = +0 . Derive and graph aggregate expenditure for this economy as a function of constant taxes 0 T > 0 and the fractional income tax rate t >0. Use this aggregate expenditure function to find equilibrium real GDP for the case that 0 T = 80 and the income tax rate is t = .2 . What is the value of the income multiplier in this case?

Expert Solution

Please give ratings it will be appreciable thank you

Rahul Sunny answered 2 years ago

Question 5 Consider a simple Keynesian model without government spending or taxation. Suppose autonomous consumption is...

Question 5 Consider a simple Keynesian model without government spending or taxation. Suppose autonomous consumption is 500 and autonomous investment is 300 and the equilibrium level of output is 2400.Then the marginal propensity to consume is: a. 2/3 b. 3/5 c. Uncertain,not enough information d. 3 Question 6 Suppose real GDP is growing at 4%per year and velocity is stable.According to the quantity theory of money,a central bank that wants to achieve inflation of 2%per year should: a. Shrink the...

1a) Suppose that GDP is $10,000, Consumption is $6,000, and Government spending is $1,500 with a...

1a) Suppose that GDP is $10,000, Consumption is $6,000, and Government spending is $1,500 with a deficit of $200. (Assume net exports are zero) What is the level of private saving in this economy? 1,500 2,500 7,200 2,700 b) The population of Scottsdale is 100 people. 40 people work full time, 20 work half time but prefer to work full time, 10 are seeking work, 10 would like to work but are discouraged from seeking, 10 are full time students...

In the Keynesian AE model, if the autonomous components of consumption, investment, government spending, and net...

In the Keynesian AE model, if the autonomous components of consumption, investment, government spending, and net export spending total $250 billion, and the MPS is 0.25, what will unplanned changes in inventory be when output is $1.010 trillion? $4 billion –$4 billion –$5 billion $5 billion If real output is currently less than the natural level of real output, which of the following will result from an increase in aggregate demand? It will make the current recessionary gap smaller. It...

Keynesian model promotes increased government spending, which implies government intervention designed to reduce taxation in order...

Keynesian model promotes increased government spending, which implies government intervention designed to reduce taxation in order to enhance demand. Let’s focus on ACA. It seems that some argue that the government should not be given the right to establish any controlling mechanism in the area of health insurance. Remember, under social control, the government has gotten the right and responsibility to maintain fairness and equity through sound regulations. If private firms would be allowed to fix prices unregulated, would there...

Suppose that consumption is 200, Government spending is 100, Investment is 100. Moreover, suppose that exports...

Suppose that consumption is 200, Government spending is 100, Investment is 100. Moreover, suppose that exports are equal to 50 while imports are 150. (a) What is the value of the current account? Does this country have a current account deÖcit or surplus? (b) What is the GNP of this economy? (c) What is the value of national saving? (d) Suppose that taxes are equal to 50. Calculate the private saving and the government budget deÖcit

please be able to discuss government spending, taxation and borrowing

3. The components of planned aggregate spending in a certain economy are given by Consumption Function:...

3. The components of planned aggregate spending in a certain economy are given by Consumption Function: C = 800 + 0.75(Y - T) – 2000r Planned Investment: I p = 400–3000r Government Revenue and Spending: T = 300 and G = 450 Net Export: NX = 75 where r is the real interest rate (For example, r = 0.01 means that the real interest rate is 1 percent). (1) Find the level of public saving. (2) Suppose that the real...

The standard RBC model predicts that a positive shock to government spending adversely affects private consumption...

The standard RBC model predicts that a positive shock to government spending adversely affects private consumption spending. Provide two different changes to the standard RBC model that would generate a positive relationship between C and G. You don’t have to solve the model again to answer this question. Just focus on the intuition and the mechanisms that would generate the result. (10 points)

Suppose that, in the basic one-period model, there is no government spending and no taxes. Production...

Suppose that, in the basic one-period model, there is no government spending and no taxes. Production by the representative firm produces pollution in proportion to the amount of output produced. Given any consumption bundle (a consumption-leisure pair), the consumer is worse off the more pollution there is. (a) In a diagram, show the competitive equilibrium and the Pareto optimum. Show that the competitive equilibrium is not Pareto optimal, and explain why. Is more or less output produced in the competitive...

if government spending decreases by $10 billion and taxation decreases by $10 billion, there will be...

if government spending decreases by $10 billion and taxation decreases by $10 billion, there will be no change in equilibrium output and employment.

Question