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The economy of Bananaland can be characterized by Equation 9.3.
EQUATION 9.3:
C = 2,000 + 0.75Yd
T = 200
G = 400
I = 500
If government spending in Bananaland increases by $50, how much will equilibrium output increase?
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- Suppose you have an open economy with Government sector imposing tax to finance its expenditures. This economy is described as follows: (in billion dollars) C = 250 + 0.85YD where tax rate is 10 percent. autonomous investment expenditures are 140 billion dollars, autonomous government expenditures are 80 billion dollars, autonomous transfer payments are 100 billion dollars, NX = 0 d) Calculate the budget surplus. e) If investment expenditures decrease by 25 billion dollar what would be the change in equilibrium income? How much is the new equilibrium income?Given: C= 400 + .6Yd. Taxes = 600 Equilibrium Output = 4,000 At equilibrium, what is the sum of investment and government purchases in this economy?Suppose MPC is 0.8. If government purchases increases by $10ce and cuts taxes by $50B, how much the equilibrium output is changed?Suppose MPC is 0.8. If government purchases increases by $10ce and cuts taxes by $50B, how much the equilibrium output is changed? a 5 b 12
- Below graph these are 5 questions. Where equilibrium will shift to A or to B if : There is a rise in public sector borrowing There is a rise in government government subsidies to the motor industry The government spends less on defence The basic rate of income tax is raised The VAT rate is cut from 20% to 15%.Suppose that government spending was increased by 10 units and that this increase was financed by a 10-unit increase in taxes. Would equilibrium income change or remain the same as a result of these two policy actions? If equilibrium income changed, in which direction would it move, and by how much? ExplainAn economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY Where t denotes the marginal tax rate. Suppose potential GDP is Y* = 10,000. What marginal tax rate t would restore GDP to potential? a.0 b.0.1 c.0.2 d.0.3
- Voters rarely get to choose the exact level of spending on a public good. Instead, they are provided with two options--a proposed spending level posed by the government and a default (or "reversion") level that would be enacted if the proposal were rejected by voters. The Leviathan theory suggests that governments will intentionally select large proposed spending levels and default levels that are well below the desired level of spending. Why is this behavior consistent with a size-maximizing government?The following equations describe an economy: Y = C + I + G + X – M [where X=exports, M=imports] C = 150 + 0.7*(Y - T) T = 30 I = 300 G = 60 X = 140 M = 100 + 0.2*(Y - T) Which of the following statement is true? The value of the government spending multiplier is 3.33. If exports increase by 10, equilibrium Y will increase by 20. If government spending increases by 40, equilibrium Y will increase by 333. Without any changes, the equilibrium level of Y is 2167.In the above figures, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can increase spending by $ trillion. 1) 1 2) 2 3) 8 4) 4
- Consider the income-expenditure identity in the closed economy of Macroland, Y = C + I + G. Suppose consumption is always a fraction MPC of income, C = MPCX Y a. Show that income Y is equal to (I + G) / (1 - MPC). b. Suppose that the citizens of Macroland spend 80% of their income and save 20%. Suppose that in equilibrium, government expenditures in Macroland are $50 billion, and investment is $60 billion. Calculate the level of income/expenditure in Macroland. c. Suppose that the Department of Macrolandian Economic Expansion wants to increase income/expenditure by $100 billion. By how much should it increase government expenditures to achieve this? d. Is the amount you answered for part c. less than, equal, to, or greater than $100 billion? Explain why this is the case.What effect an increase of government spending will have on the output equilibrium in the goods market? Explain using autonomous spending. please explainConsider a demand-determined model, with a marginal propensity to consume of 0.80, a marginal propensity to import of 0.25 and a tax rate of 0.20. How much of an increase in economic activity would be generated by a $150 million increase in government spending? (Answers in millions, with no dollar sign - ie. $125,500,000 represented as 125.5) Answer is 245.9, show workings, thanks.
