ment has increased its spending by RM 80, what is the amou ax that is required so that the govemment's action in increasir NOT have an impact on the government's budget balance?
ment has increased its spending by RM 80, what is the amou ax that is required so that the govemment's action in increasir NOT have an impact on the government's budget balance?
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
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Question
Transcribed Image Text:(b) If the govemnment has increased its spending by RM 80, what is the amount of
autonomous tax that is required so that the government's action in increasing its
spending does NOT have an impact on the government's budget balance?
Answer : AT* =
Transcribed Image Text:A 3-sector economic model was constructed and solved, and assuming the parameters
take on certain values, the multiplier matrix that is obtained is displayed in Table 1.
You are required to answer the following questions by showing your calculation in
the space provided.
Table 1: Multiplier Matrix
Exogenous Variables
Endogenous Variables
I*
G*
T*
: Output
: Consumption Expenditure 1.895
Y
2.631
2.631
- 2.105
C
1.895
- 2.316
T
Tax Revenue
0.263
0.263
0.789
YD : Disposable Income
2.368
2.368
- 2.895
В
: Government Budget
0.263
- 0.737
0.789
Balance
S
: Saving
0.474
0.474
- 0.579
(a) If autonomous investment is reduced by RM100, justify its precise impact on
disposable income and tax.
Answer : AYD=
AT =
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