Macroeconomics, Student Value Edition Plus MyEconLab with Pearson eText Access Card Package
Macroeconomics, Student Value Edition Plus MyEconLab with Pearson eText Access Card Package
6th Edition
ISBN: 9780134439839
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 16, Problem 16.4.7PA
To determine

Multiplier effect.

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Briefly discuss the effects of time lags in relation to fiscal policy, including: a comparison to monetary policy, what the level of fiscal policy will be, and its effect on fiscal policy during recession.
You 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
If income tax rates are increased in an attempt to balance the federal budget, we should expect to see   a. a decrease in consumption and a decrease in GDP.   b. a decrease in consumption and an increase in GDP.   c. an increase in consumption and an increase in GDP.   d. an increase in consumption and a decrease in GDP.

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Macroeconomics, Student Value Edition Plus MyEconLab with Pearson eText Access Card Package

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