A. Calculate the levels of consumption and savings that occurs when the economy is in equilibrium. B. Computer the government budget deficit in this economy. C. If government spending in banana land increases by $1000 what is the amount of the increase in equilibrium output? D. If taxes in banana land decrease by $1000 what is the new equilibrium output in this economy? E. To keep the government budget balanced, of both government spending and taxes in banana land increase by $1000 what is the change in equilibrium income level?
A. Calculate the levels of consumption and savings that occurs when the economy is in equilibrium. B. Computer the government budget deficit in this economy. C. If government spending in banana land increases by $1000 what is the amount of the increase in equilibrium output? D. If taxes in banana land decrease by $1000 what is the new equilibrium output in this economy? E. To keep the government budget balanced, of both government spending and taxes in banana land increase by $1000 what is the change in equilibrium income level?
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 4SQP
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Question
A. Calculate the levels of consumption and savings that occurs when the economy is in equilibrium.
B. Computer the government budget deficit in this economy.
C. If government spending in banana land increases by $1000 what is the amount of the increase in equilibrium output?
D. If taxes in banana land decrease by $1000 what is the new equilibrium output in this economy?
E. To keep the government budget balanced, of both government spending and taxes in banana land increase by $1000 what is the change in equilibrium income level?
Transcribed Image Text:Essay Question 1:
The economy of Bananaland can be characterized by the
following equation.
0.75Yd
100,000
Consumption function:
Net Taxes:
Government Spending:
C = 6000 +
T = 16000
G = 20000
Planned Investment:
I = 11000
Aggregate output at equilibrium Y = '
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