We have the following model of the economy: ( 1 ) Y = C + S +
Question:
We have the following model of the economy:
( 1 ) Y = C + S + T (7) G = GA
( 2 ) E = C + I + G (8) T = TA
( 3 ) Y = E (9) YD = Y - T
( 4 ) C = c(YD, CA) (10) Deficit = G - T
( 5 ) S = s(YD, SA)
( 6 ) I = IA
The following data for equilibrium values will help in this problem.
G = 3,000
I = 1,800
S = 2,400 ?S/?Y = .25
T = 2,400 Y* = 9,000
Calculate
1. the equilibrium value of consumption C = ________
2. marginal propensity to consume (?C/?Y) MPC = ________
3. the expenditure multiplier m = ________
4. The government deficit now has a value of ____________.
Pessimism occurs in the business community. Planned investment falls by 150. How much of an effect does this have on equilibrium GDP?
5/6. GDP will RISE / FALL by ____________.
The Administration attempts to restore the original GDP level by changing the tax level.
7/8. Autonomously taxes should be RAISED / REDUCED by __________ (a number)
Calculate the government deficit after the economy has reached its final equilibrium, after the investment change and tax change.
9. Deficit = __________
Calculate the final total value for consumption, after the investment change and tax change.
10. C = ___________
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill