Question

Suppose the government raises its revenue by a net tax of 40 percent on income, t...

Suppose the government raises its revenue by a net tax of 40 percent on income, t = 0.4. The marginal propensity to consume out of disposable income is 0.9 and the marginal propensity to import is 0.2.
Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places.

a) What is the slope of the AE function? What is the size of the multiplier?

b) Autonomous expenditure by the household and business sectors (C + I) is 300, government expenditure is 400, exports are 50 and imports are 70. What is the autonomous expenditure and equilibrium output? What is the government's budget balance?

c) The government increases its expenditures by 60 to provide additional funding for national defense. What is the effect on equilibrium income and output? What is the effect on the net tax revenue?

d) What is the government's new budget balance?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the government raises its revenue by a net tax of 40 percent on income, t...
Suppose the government raises its revenue by a net tax of 40 percent on income, t = 0.4. The marginal propensity to consume out of disposable income is 0.9 and the marginal propensity to import is 0.25. Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. a) What is the slope of the AE function? What is the size of the multiplier? Slope of AE = 0Multiplier...
Suppose the government raises its revenue by a net tax of 20 percent on income, t...
Suppose the government raises its revenue by a net tax of 20 percent on income, t = 0.2, the marginal propensity to consume out of disposable income is 0.75, the marginal propensity to import is 0.15, and the government has an outstanding public debt of 1,100. In addition, the autonomous expenditure in households, business and foreign sectors (C + I + X - IM) is 400 and government expenditure is 400. Note: Keep as much precision as possible during your...
Aggregate Output/Income Net Taxes Planned Investment Aggregate Consumption Government Spending 1,000 200 200 680 200 1,100...
Aggregate Output/Income Net Taxes Planned Investment Aggregate Consumption Government Spending 1,000 200 200 680 200 1,100 200 200 760 200 1,200 200 200 840 200 1,300 200 200 920 200 1,400 200 200 1,000 200 1,500 200 200 1080 200 1,600 200 200 1,160 200 Please show calculation a. Complete the table by determining the aggregate expenditure, the unplanned inventory change, savings and disposable income at all income levels                           b.               Determine the marginal propensity to consume (MPC) and marginal...
Imagine an economy where an additional injection of $10 billion in export sales results in national...
Imagine an economy where an additional injection of $10 billion in export sales results in national income increasing by $25 billion. There is a marginal propensity to save of 0.19 and a marginal propensity to tax of 0.18. What is the marginal propensity to import? Imagine an economy where: Autonomous expenditure is $40, equilibrium national income is $100, full employment output is $150, the marginal propensity to consume is 0.6, the size of the multiplier is 2.5 What is the...
Income    (Yd) Consumption Expenditure Saving Investment Expenditure Government Expenditure Net Export Expenditure Aggregate Expenditure $8000...
Income    (Yd) Consumption Expenditure Saving Investment Expenditure Government Expenditure Net Export Expenditure Aggregate Expenditure $8000 $11,000 $2,500 $5,000 $12,500   12,000 14,000 2,500 5,000 12,500 20,000 20,000 2,500 5,000 12,500 30,000 27,500 2,500 5,000 12,500 50,000 42,500 2,500 5,000 12,500 100,000 80,000 2,500 5,000 12,500 1.Calculate savings, autonomous consumption, MPC, MPS, break even income, and the equilibrium level of income (Y = AE = C + I + G + NX) in the above given information. 2. Draw a graph...
Assume the following values: Marginal Propensity to Consume b = 0.8; Autonomous Consumption a = 200;...
Assume the following values: Marginal Propensity to Consume b = 0.8; Autonomous Consumption a = 200; Investment Spending I = 250. There is no government spending. a) For a consumption function C = a + bY, what is the equilibrium value for income Y in the economy? (The value at which planned aggregate expenditure and planned output coincide.) b) What changes when Investment Spending increases to 300? When it drops to 225? c) What effect can you observe in the...
In an economy with no exports and​ imports, autonomous consumption is ​$2 ​trillion, the marginal propensity...
In an economy with no exports and​ imports, autonomous consumption is ​$2 ​trillion, the marginal propensity to consume is 0.6​, investment is ​$5 ​trillion, and government expenditure on goods and services is ​$6 trillion. Taxes are ​$4 trillion and do not vary with real GDP. If real GDP is ​$33.1, calculate disposable​ income, consumption​ expenditure, and aggregate planned expenditure. What is equilibrium​ expenditure? The author got the equilibrium expenditure is ​$26.5 trillion but the expert got 25. Please break down...
Suppose that the German taxes and real imports do not depend on German real disposable income....
Suppose that the German taxes and real imports do not depend on German real disposable income. Autonomous real consumption is €500 billion, investment spending is €250 billion, lump-sum taxes (taxes that do not depend on real income) is €100 billion, German government spending is €100 billion, real net exports are €0 billion, and the German Marginal Propensity to Consume is 0.5. What is the value of the equilibrium German real GDP, Y*? €1,600 billion. €1,000 billion. €800 billion. €850 billion....
Consider an economy in which taxes, planned investment, government spending on goods and services, and net...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 10r; c = 0.6; Ta = 1,800; Ip = 2,400 – 50r; G = 2,000; NX = -200 (a)Derive Ep and...
Income    (Yd) Consumption Expenditure Saving Investment Expenditure Government Expenditure Net Export Expenditure Aggregate Expenditure $8000...
Income    (Yd) Consumption Expenditure Saving Investment Expenditure Government Expenditure Net Export Expenditure Aggregate Expenditure $8000 $11,000 $2,500 $5,000 $12,500   12,000 14,000 2,500 5,000 12,500 20,000 20,000 2,500 5,000 12,500 30,000 27,500 2,500 5,000 12,500 50,000 42,500 2,500 5,000 12,500 100,000 80,000 2,500 5,000 12,500 Calculate savings, MPC, MPS, break even income, and the equilibrium level of income (Y = AE = C + I + G +NX) in the above given information. Draw a graph showing disposable income (Yd)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT