first image is resource. questions starts in the second image (4. and 5.) We use the following terminology in this part: aggregate income Y and disposable incomeYa (= Y –T), consumption function C(Ya), planned investment function I(r), governmentspending G, and taxation T = tY where t is the marginal tax rate; r% denotes the realinterest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interestrate is 2%. When doing calculations, the interest rate should not simply be inserted indecimal form. For example, if r = 2 then I(2) = 124 – 2 = 122.)Consider a hypothetical economy where:• C(Ya) = 12 + 0.75 × (Y – T)• I(r) = 124 – 1 × r• G = 120• t = 20% 4. Suppose that the price level (P) is 3333.33. What is the equilibrium value of aggre-gate income, Y? (Hint: use the AD equation.)5. What are the equilibrium values of the interest rate, r, and investment, I? (Hint:use the MPR or IS, and I(r) equations.)

Given: C(Ya) = 12 +0.75 x (Y-T) I(r) = 124-1xr G=120 t=20%

4. Suppose that the price level (P) is 3333.33. What is the equilibrium value of aggre- gate income, Y? (Hint: use the AD equation.) 5. What are the equilibrium values of the interest rate, r, and investment, I? (Hint: use the MPR or IS, and I(r) equations.)

4. Suppose that the price level (P) is 3333.33. What is the equilibrium value of aggre- gate income, Y? (Hint: use the AD equation.) 5. What are the equilibrium values of the interest rate, r, and investment, I? (Hint: use the MPR or IS, and I(r) equations.)

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter21: Fiscal Policy

Section: Chapter Questions

Problem 19SQ

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Question

first image is resource. questions starts in the second image (4. and 5.)

We use the following terminology in this part: aggregate income Y and disposable income
Ya (= Y –T), consumption function C(Ya), planned investment function I(r), government
spending G, and taxation T = tY where t is the marginal tax rate; r% denotes the real
interest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interest
rate is 2%. When doing calculations, the interest rate should not simply be inserted in
decimal form. For example, if r = 2 then I(2) = 124 – 2 = 122.)
Consider a hypothetical economy where:
• C(Ya) = 12 + 0.75 × (Y – T)
• I(r) = 124 – 1 × r
• G = 120
• t = 20%

4. Suppose that the price level (P) is 3333.33. What is the equilibrium value of aggre-
gate income, Y? (Hint: use the AD equation.)
5. What are the equilibrium values of the interest rate, r, and investment, I? (Hint:
use the MPR or IS, and I(r) equations.)

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