In the dynamic model, there is a government that imposes lump-sum taxes on the household and spends. The consumption demand function in period 1 is CP = 0.2(Y1 + (Y2/R) – T1 – (T2/R)) - and the consumption demand function in period 2 is C2 = 0.8(RY1 + Y2 – RT1 – T2). We have Y1 = = 20, G2 = 12, R = 1.2. 100, Y2 = 180, Gı %3D If the government has a balanced budget each period, the equilibrium level of household consumption in period 1 equals 44. What is the equilibrium level of household consumption in period 1 if the government does not change its spending but it changes taxes so that it has a deficit instead of having a balanced budget in the first period? 44 100 120 80

In the dynamic model, there is a government that imposes lump-sum taxes on the household and spends. The consumption demand function in period 1 is CP = 0.2(Y1 + (Y2/R) – T1 – (T2/R)) - and the consumption demand function in period 2 is C2 = 0.8(RY1 + Y2 – RT1 – T2). We have Y1 = = 20, G2 = 12, R = 1.2. 100, Y2 = 180, Gı %3D If the government has a balanced budget each period, the equilibrium level of household consumption in period 1 equals 44. What is the equilibrium level of household consumption in period 1 if the government does not change its spending but it changes taxes so that it has a deficit instead of having a balanced budget in the first period? 44 100 120 80

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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