Question: this is Macroconomics problem During the lockdown. in a closed economy with proportional tax system the government orders the rms to threat a certain share

this is Macroconomics problem

this is Macroconomics problem During the lockdown. in a closed economy with

During the lockdown. in a closed economy with proportional tax system the government orders the rms to threat a certain share at their after-tart prots to support currently unemployed mrltets. Apparently. the government is unable to pay unemployment benefits and balance the budget. In turn. firms decide to pay no dividends to their shareholders. so all the retained profits are fully reinvested. (e] [10 merits] List the basic assumptions and tormutate a setup of the lS-LM model assuming that the economy is in liquidity trap. Be sure to explain the meaning of all variables and parameters you use. lb] [10 merits] Derive expression lot the equilibrium output at suit a demand-determined economy. Explain economic meaning of the autonomous expenditure multiplier %. (ct [10 marks] What does the marginal propensity to expend (mp9) mean? How will It be affected if firms increase the share of their after-tax profits directed to unemployed? Derive anaiytically and explain intuitively. {d} [10 marks] How will mp: and the multiplier from {b} be affected it time are forced to pay higher prot tax rate r\"? Derive analytically and explain intuitively. Consider now the case of quarantine measures that protect local markets from competitive entry causing the share at corporate prots to rise. Assume for simplicity. that both income tax and corporate tax rates are now equal. so t = t\". l} [10 marks] What will be the elfeot ol such a quarantine on the economy's multiplier? Derive analytically and explain intuitively. g) [10 marks] Suppose that the Corporate Social Responsibility is \"favoured' by the government. In particuar. the sum of the rms' transfers to unemployed is exempted lrom corporate taxation? How will tripe be ell'ected by an increase in the share of the flrm's after-tax prollts directed to unemployed? Would your answer to to] remain unchanged

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