C. What is the value of tax multiplier in this economy?.d. By how much will equilibrium income in the goods market increase if thegovernment decides to increase its purchases by PhP 13,500?Assume that the tax rate is still 12%. Can government expenditure helpincrease output in the economy? Suppose the households in a hypothetical economy has the followingconsumption functionC = 1200+ 0.85Y,dWhere Y is the disposable income. The government in this economy imposes a taxdrate of0 < t < 1 to households' income (ex. A t = 0.10 means that 10% of households'income goes to tax payments).

Aggregate demand (AD)= C (private consumption expenditure)+ I (private investment expenditure)+ G…

C. What is the value of tax multiplier in this economy?. d. By how much will equilibrium income in the goods market increase if the government decides to increase its purchases by PhP 13,500 ? Assume that the tax rate is still 12%. Can government expenditure help increase output in the economy ?

C. What is the value of tax multiplier in this economy?. d. By how much will equilibrium income in the goods market increase if the government decides to increase its purchases by PhP 13,500 ? Assume that the tax rate is still 12%. Can government expenditure help increase output in the economy ?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 17SQ

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Question

C. What is the value of tax multiplier in this economy?.
d. By how much will equilibrium income in the goods market increase if the
government decides to increase its purchases by PhP 13,500
?
Assume that the tax rate is still 12%. Can government expenditure help
increase output in the economy
?

Suppose the households in a hypothetical economy has the following
consumption function
C = 1200+ 0.85Y,
d
Where Y is the disposable income. The government in this economy imposes a tax
d
rate of
0 < t < 1 to households' income (ex. A t = 0.10 means that 10% of households'
income goes to tax payments).

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