expenditures G=100. What can be said about the budget about this countr The balanced budget multiplier is greater than 1. The budget of the country is balanced. We cannot say anything about the budget. The country has a budget surplus. The country runs a budget deficit.
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- Consider an economy described by the following equations: C = 300 + 0.90 (Y – T) (Consumption) I = $200 (Investment) G = $300 (Government spending) T = $200 (Taxes) Determine the equilibrium level of national income. Suppose government spending increases to $400. What is the new level of income? What is the government spending multiplier? Suppose taxes increase to $300. What is the new level of income? What is the government tax multiplier? Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?Which of the following sentences correctly describes the budget of the Federal Government of the Unites States during the past six decades? A. Since 1961, the Government always runs in budget deficits, meaning it spends more money than it receives every year – except for the brief period of 1998 to 2001. B. Since 1961, the U.S. Government has been an example of how to run a country on a balanced budget, meaning it balances the level of spending with the level of tax revenue. C. Since 1961, the Government always runs in budget surpluses, meaning it receives more money than it spends every year – except for the brief period of 1998 to 2001. D. Since 1961, the Government budget doesn’t show a clear trend. About half of the time, the U.S. incurs budget deficits; to compensate for that, the Government runs budget surpluses half of the time too.In a closed economy such that: C = 100 + 0.8 (Y – T) Md = 0.25 Y - 50 R I = 700 - 50 R Ms = $500 G = $600 T = $500 Solve for the equilibrium values of Y and R. If both government spending and taxes increase by $100 each, what happens to the national income? Does the balanced budget multiplier theorem hold?
- Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?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!Suppose that the following equations describe the 4-sector economyConsumption function C= 60 + 0.8 Yd,Investment function I= 100-5i,% interest rate i=6 (use 6 to compute for the investment),Government Expenditure G= 76,Lump sum Tax Tx= 15,Transfer payments TR=60,Exports X=70Imports M=20+0.2Y 5.1. Calculate the equilibrium level of income. At this level of income, is the economy operating with a budget surplus or budget deficit?5.2. Calculate the investment, government, tax, transfer payments and foreign trade multiplier.5.3. Suppose that government increases its education and health services by 65, what is the new level of income?5.4. If exports increase by 10, what is the new level of income? Is the economy operating with a trade deficit or surplus at this level of income?
- Suppose that the marginal propensity to consume is 0.75. If the government decreases spending by Ksh 500 billion, what is the change in output? If the government decreases taxes by Ksh 500 billion, what is the change in (ii) output? If the government decreases transfer payments by ksh 500 billion, what is the change in output If the government decreases spending by ksh 500 billion and at the same time decreases taxes by ksh 500 billion, what is the change in output?In Hofstralia, initially nobody is defaulting on their loan, and the government is running a balanced budget in every period. Joe is a borrower. Draw Joe’s intertemporal budget constraint, use an indifference curve to show his optimal consumption bundle, and place an endowment point (and show its coordinates) on his budget constraint consistent with the fact that he is a borrower. Suppose that the government is eliminates taxes in the current period, and finances its spending through a deficit. Show graphically how the tax cut would affect Joe’s borrowing, and explain what would happen to his consumption and welfare. Would the Ricardian equivalence hold? Why or why not? Suppose now that due to a recession people start losing their jobs. Banks expect some borrowers to default but because of asymmetric information, they do not know which ones. Explain how interest rate on loans would change and why. Show on the graph and explain how events in the financial market would affect Joe’s…In Hofstralia, initially nobody is defaulting on their loan, and the government is running a balanced budget in every period. Joe is a borrower. Draw Joe’s intertemporal budget constraint, use an indifference curve to show his optimal consumption bundle, and place an endowment point (and show its coordinates) on his budget constraint consistent with the fact that he is a borrower. Suppose that the government is eliminates taxes in the current period, and finances its spending through a deficit. Show graphically how the tax cut would affect Joe’s borrowing, and explain what would happen to his consumption and welfare. Would the Ricardian equivalence hold? Why or why not? Suppose now that due to a recession people start losing their jobs. Banks expect some borrowers to default but because of asymmetric information, they do not know which ones. Explain how interest rate on loans would change and why. Show on the graph and explain how events in the financial market would affect Joe’s…
- 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?Suppose the consumption function is given by C(Y) = 50+0.5 (Y-T), where Y represents income and T represents net taxes. Suppose that the level of government expenditure, G, is 200; net taxes, T, are 200; planned investment, I, is 400. 1)The government expenditure multiplier is: a. -2 b. -1 c. 2 d. 1 The equilibrium level of output is: a. 850 b. 1500 c. 900 d. 1100You are given data on the following variables in an economy: Item Value Government spending 300 Planned investment 200 Net exports 50 Autonomous taxes 250 Income tax rate 0.1 Marginal propensity to consume 0.5 Consumption (C) is 600 when income (Y) is equal to 1500. a. Solve for autonomous consumption and equilibrium level of output if there is an income tax t=0.2. b. In the economy with an income tax of 10%, what is the budget balance of the government? c. Briefly explain the function of the multiplier as part of Keynesian