2. Write down an expression for the Investment-Savings (IS) Curve. (Hint: First use the AE equation to find an expression for equilibrium Y. Next, remember that the IS equation takes the form of r = ....)
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equation for ae = y =640 − 2.5r
first image is just a resource, actual question is question 2.
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- Given that the full employment output is $2,500 and the equilibrium real GDP is $2,800, and the MPS (=Marginal Propensity to Save) is 0.25, which of the following taxation changes would most likely bring the economy to a full employment level of real GDP? Group of answer choices $75 increase in taxes $100 decrease in taxes $75 decrease in taxes $100 increase in taxesSuppose a closed economy has an aggregate consumption function given by C = 50 + 0.50Yd and generates $2500 output and income in equilibrium. Suppose also that the government spends 400 and imposes a lump-sum tax of 100. What is the level of intended investment?Suppose that autonomous consumption (a) is 200, private investment spending (I) is 340, government spending (G) is 300 , Net taxes (T) are 300 and marginal propensity to consume (b) is 80 %, and marginal tax rate (t) is 25 % . By using the above information: a) Find the equilibrium value of national income (you can take the approximate value if necessary b) Find out the effects of an increase in government expenditure by100 c) Just find the new national income equilibrium level when marginal tax rate is increased to 30 % and marginal propensity to consume is increase to 0.9. (you can give the numerical value approximately
- Consider the following consumption function: C (Y)=0.8(Y-T) where Y represents income and T represents net taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100. 1)The equilibrium level of output is: a. 1200 b. 900 c. 1100 d. 1000 Tha values for the government expenditure and tax multipliers are, respectively: a. 5 and -4 b. -2 and 2 c. 2 and 2 d. 2 and 4Given the above model for an economy C = 100 + 0.8Yd G = 800 T = 500 I = 200 c)Find Tax multiplier. d)Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100). f)Find the new level of output if the government spending is increased by 100 and this government expenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).115.) If the marginal propensity to consume is 0.6, then according to the Keynesian Cross, the tax multiplier is -$3 -$1.5 -$0.6 none of the above
- Suppose the government reduces taxes by $20 billion and that there is no crowding-out effect and the MPC is .75 then the total effect of the tax cut on aggregate demand is a) 50 billion b) 60 billion c) 70 billion d) 80 billionIf the marginal propensity to consume is 0.9, then the tax multiplier will be: Group of answer choices impossible to determine. greater than 10. less than 10. zero, because there is no multiplier effect from taxes.Consider the following economy populated by a government and a representative household. There is no uncertainty and the economy and the representative household and government within it last forever. The government consumes a constant amount gt = g > 0, t ≥ 0. The government also sets sequences of two types of taxes, {τct, τkt}∞t=0 . Here τct, τkt are, respectively, a possibly time-varying flat rate tax on consumption and a time varying flat rate tax on earnings from capital. The preferences of the household are ordered by Where β ∈ (0, 1) and u(·) is strictly concave, increasing and twice continuously differentiable. The feasibility condition in the economy is Where kt is the stock of capital owned by the household at the beginning of time t and δ ∈ (0, 1) is a depreciation rate. At time 0, there are complete markets for dated commodities. The household faces the budget constraint: Where we assume that the household…
- Given the national income model Y=C+I+G. C=400+0.72Y; I=100 and G=90 a) Obtain the equilibrium level of output and the size of multiplier? b) By how much will output increase when investment spending increases by 50%? Graphically demonstrate your answer in (a) c) How will your answers in (a)–(b) change if the consumption function is now given as C = 400 + 0.72Yd where Yd = Y – T and the tax function is given as T = 40 + 0.15Y?Suppose that the government of Ansonia is experiencing a large budget deficit with fixed government expenditures of G=250 and fixed taxes of T=150. Assume that consumers of Ansonia behave as described in the following consumption function: C=300+0.8(Y−T) Suppose further that investment spending is fixed at 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Next, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 120. Recalculate the equilibrium level of GDP using the tax multiplier. Solve for equilibrium levels of Y, C, and S after the tax cut and check to ensure that the multiplier worked. What arguments are likely to be used in support of such a tax cut? What arguments might be used to oppose such a tax cut? Thank you sososooo much!