The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income.
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- The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What is the equilibrium level of national income for this economy? A) Y=200 B) Y=400 C) Y=300 D) Y=500The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What does consumption equal when income equals 600? Group of answer choices a. 324 b. 374 c. 540 d. 104Although our development of the Keynesian cross in this chapter assumes that taxes are a fixed amount, most countries levy some taxes that rise automatically with national income. (Examples in the United States include the income tax and the payroll tax.) Let’s represent the tax system by writing tax revenue as T = T− + tY, where T− and t are parameters of the tax code. The parameter t is the marginal tax rate: if income rises by $1, taxes rise by t × $1. 1.How does this tax system change the way consumption responds to changes in GDP? 2. Im the Keynesian cross, how does this tax system alter the government purchases multiplier? 3. In the IS–LM model, how does this tax system alter the slope of the IS curve? (solve all three tasks)
- In a Keynesian model, why would a $100 million increase in government expenditure on goodsand services have a greater impact on aggregate demand than a $100 million reduction in taxrevenue?A Consumers spend only part of any extra disposable income.B Government expenditure does not create wealth.C The marginal tax rate affects the value of the multiplier.D The multiplier does not apply to consumer expenditure.In the Keynesian-Cross model, if autonomous investment increases by 100 and government transfers decrease by 100, which of the following is true? A. Income will increase by 100. B. Income will increase by the multiplier times 100. C. Income will not change. D. Income will decrease by the multiplier times 100. E. Income will increase, but we can’t say by how much.Consider the following numerical example of the simple Keynesian model with no government spending, taxes or foreign sector(all figures in R million): C=100+0,9Y I=50 a, what is the value of the marginal prosperity to consume (MPC) in the model. b, use a graph to illustrate the equilibrium level of output.
- In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Planned investment is 300; government purchases is 350. Assume a balanced budget.a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 400, what is the new equilibrium income? What is the multiplier for government purchases?d. What level of government purchases is needed to achieve an income of 2,200? (Taxes remain unchanged.)e. What level of taxes is needed to achieve an income of 2,200? (Government purchases remain at 350.)Given the following information on spending in a simple Keynesian model what is the level of autonomous spending? CA = 800 GA = 600 IA = 400 MPC =2/3 XA =500 MA =300)Assume that an economy is characterized by the following equations:C = 250 + 0.75(Y - T);T = 100;G = 50I = 200 - 25rMs = 1000;P = 2;Md /P = Y - 100ra. Using the Keynesian cross model, find the equilibrium level of Y when r = 6 and graph the results.b. Calculate the IS and LM equations. Use the IS-LM model to find the equilibrium level of r and Y.Graph the results.
- n the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). Planned investment is 300; government purchases is 350. Assume a balanced budget. a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 400, what is the new equilibrium income? What is the multiplier for government purchases? Solve D and Ed. What level of government purchases is needed to achieve an income of 2,200? (Taxes remain unchanged.)e. What level of taxes is needed to achieve an income of 2,200? (Government purchases remain at 350.)Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model. The MPC is 0.6 in each country. Country A decides to increase government spending by $2 billion, while Country B decides to cut taxes by $2 billion. In which country will the new equilibrium level of income be greater? Show all computations.In the Keynesian cross, assume that the consumption function is given byC = 200 + 0.75 (Y - T).Planned investment is 100; government purchasesand taxes are both 100.d. What level of government purchases is neededto achieve an income of 1,600?