5. Given a simple model Y= C+I0+Go C= Co+ bYd Yd= Y-T T= To Where taxation...

Transcribed Image Text:

5. Given a simple model Y= C+I0+Go C= Co+ bYd Yd= Y-T T= To Where taxation does not depend on income, calculate the effect on the equilibrium level of income of a one-unit change in government expenditure exactly offset by a one-unit change in taxation. That is, calculate the balanced-budget multiplier for an economy in which there is only autonomous taxation. (20 Points) 5. Given a simple model Y= C+I0+Go C= Co+ bYd Yd= Y-T T= To Where taxation does not depend on income, calculate the effect on the equilibrium level of income of a one-unit change in government expenditure exactly offset by a one-unit change in taxation. That is, calculate the balanced-budget multiplier for an economy in which there is only autonomous taxation. (20 Points)