C=c0+ cl(Y-T). S=-50 +0.6Y where C is consumption, Y is income, T is the level of...

 

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C=c0+ cl(Y-T). S=-50 +0.6Y where C is consumption, Y is income, T is the level of taxes, I and G are, respectively, private investment and government spending, and S is private saving. T=50+ 0.1YI=150 G=200 1. Find the equilibrium values for GDP, consumption, disposable income, and private saving. (10 points) 2. Find the expression and value of the investment multiplier (round your result to two decimal places). (3 points) 3. Now assume that private investment, I, decreases from 150 to 80. Find the change in GDP, induced by the change in investment. (3 points) 4. If the government wants to bring GDP back to the level before the investment decline, without calculation, discuss in which direction it should change each of the following policy instruments if it were to use them individually (6 points): a. Government spending b. Level of autonomous taxes c. Marginal tax rate 5. What is the relationship between the magnitudes of changes in government spending and autonomous taxes? Discuss! (3 points) C=c0+ cl(Y-T). S=-50 +0.6Y where C is consumption, Y is income, T is the level of taxes, I and G are, respectively, private investment and government spending, and S is private saving. T=50+ 0.1YI=150 G=200 1. Find the equilibrium values for GDP, consumption, disposable income, and private saving. (10 points) 2. Find the expression and value of the investment multiplier (round your result to two decimal places). (3 points) 3. Now assume that private investment, I, decreases from 150 to 80. Find the change in GDP, induced by the change in investment. (3 points) 4. If the government wants to bring GDP back to the level before the investment decline, without calculation, discuss in which direction it should change each of the following policy instruments if it were to use them individually (6 points): a. Government spending b. Level of autonomous taxes c. Marginal tax rate 5. What is the relationship between the magnitudes of changes in government spending and autonomous taxes? Discuss! (3 points)

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1 Equilibrium values GDP C I G 200 C c0 c1Y T 100 06200 100 14... View the full answer