question 1 -part D and E 1. Suppose that the economy can be described by the following equations:C = 400 + (8/9)*DII= 300G= 800T= (1/2)*Y(X -М) 3 0.a. If national income (Y) increased by $1, by how much would consumption increase? What isthe name of this concept?b. Find the equilibrium level of output.c. The budget for this fiscal year increases government spending by $50.i) Sketch the effect of the increase in government spending.ii) Calculate the new equilibrium level of income.iii) Calculate the change in income and compare to the increase in government spending.Comment.iv) Given your numerical answer in part (iii), calculate the change in national incomewhen government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compareto part (iv).Now G assumes its original value of G = 800.d. Congress decreases the tax rate from (1/2) to (1/4)i) Sketch the effect of the decrease in the tax rate.ii) Calculate the new equilibrium level of income.e. Suppose that voters care more about reducing unemployment than the level of the federaldeficit. If you were running for Congress this year (and you wanted to win the election), wouldyou promise to increase or to decrease government spending? Explain your answer.

Given information C= 400+(8/9)*DI I=300 G=800 T-1/2*Y X-M=0

1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I= 300 G= 800 T= (1/2)*Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept? b. Find the equilibrium level of output. c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending. ii) Calculate the new equilibrium level of income. iii) Calculate the change in income and compare to the increase in government spending

1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)DI I= 300 G= 800 T= (1/2)Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept? b. Find the equilibrium level of output. c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending. ii) Calculate the new equilibrium level of income. iii) Calculate the change in income and compare to the increase in government spending

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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