You are given the following information about an open economy with government activity. Consumption C = 5 + 0.8Y. Imports M = 2.5 + 0.1Y. The only tax is a uniform income tax at a rate of 25 percent. Investment I, Government G, and exports X are autonomous. The initial level of National Income Y is 100, and trade is initially balanced. a) Find the values of I and G. b) Find the change in National Income Y if the autonomous part of imports increases to 5. c) Calculate the trade balance resulting from b above. d) Find the new tax rate which would be necessary to restore trade balance

You are given the following information about an open economy with government activity. Consumption C = 5 + 0.8Y. Imports M = 2.5 + 0.1Y. The only tax is a uniform income tax at a rate of 25 percent. Investment I, Government G, and exports X are autonomous. The initial level of National Income Y is 100, and trade is initially balanced. a) Find the values of I and G. b) Find the change in National Income Y if the autonomous part of imports increases to 5. c) Calculate the trade balance resulting from b above. d) Find the new tax rate which would be necessary to restore trade balance

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

See similar textbooks

Similar questions

The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff will reduce South Africa's trade deficit.
In a country, private savings equals 600, the government budget surplus equals 200, and the trade surplus equals 100. What is the level of private investment in this economy?
The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff will reduce South Africa's trade deficit A. Because exports will be promoted and imports cannot possibly change B.Because imports will be reduced and exports cannot possibly change C.Only if the tariff has no impact on South Africa's spending or income D.Only if the tariff leads to increased income in South Africa relative to its spending
Explain how economic populist policies usually lead to overvalued exchange rates and large trade deficits.
if a country's economy records a surplus, how will the X and M components be represented in its national savings and investment identity? (X-M); right side, (X-M); left side (M-X); demand side, (M-X); supply side
Which of the following best describes the Washington Consensus? It describes a bipartisan legislative agreement in the U.S. Congress. It describes monetary policy adopted by the U.S. president. It describes a protectionist economic policy used by the IMF. It describes economic policy that supports government deficit spending. None of these accurately describes the Washington Consensus.
Assuming that a country has a trade deficit of $50 billion, which of the following is true: A. The country's exports are $120 billion and its imports are $180 billion B. The country's exports are $100 billion and its exports are $150 billion c. The country's imports are $120 billion and its exports are $180 billion d. The country's exports are $150 billion and its imports are $100
Assume that in 2010, a country had a GDP of $500$⁢500 billion, a budget deficit of $6$⁢6 billion, and a trade deficit of $10$⁢10 billion. In five years, the budget deficit became $4.0$⁢4.0 billion, and the trade deficit as a percentage of GDP changed by 0.70.7 percentage point(s). GDP remained unchanged.Calculate the dollar value of the trade deficit in 2015.
Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. Country B has private savings of $60 billion, and investment expenditures of $50 billion. Country C has GDP of $300 billion, investment of $70 billion, consumption of $180 billion, taxes of $60 billion, and transfers of $20 billion. Based on this information, which country has a $10 billion deficit? Country A Country B Country C All the three countries.
A common market takes place when (in the presence of tariffs on imports) Select one: any 2 countries liberalize the movement of their labor (and capital) any 2 countries align their monetary policies any 2 countries have free trade between them none of the above
Cosmopolitan cities are typically characterized by: Question 12 options: Rural locations High diversity level Slow economy Low inflation What are the factors that homogenize us: Question 13 options: Tourism Global challenges Trade All the other options What is a balance of payments: Question 14 options: A balance reflecting the country's payments on the external debt A balance reflecting the country's internal debt A record of country's import-export relationships with the other countries All the country's economic transactions with the rest of the world in a given year Foreign-direct investment balance reflects: Question 15 options: The difference between the outward direct investments made by residents and non-residents in…
Consider the imaginary small country of Kootenay. Assume that Kootenay is closed to trade, so that its net exports are equal to zero. Suppose that the economy is described by the following consumption function, where C is consumption, Y is income (real GDP), IP is planned investment, G is government purchases, and T is taxes: C = $40 billion+0.5×(Y – T) Suppose G=$115 billion, IP=$50 billion, and T=$10 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y=C+IP+G, the equilibrium income level is billion. Suppose that government purchases are increased by $100 billion. The new equilibrium level of income will be equal to billion. Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to