Question

In the real world, taxes typically depend on the level of income and so tend to...

In the real world, taxes typically depend on the level of income and so tend to be higher when income is higher. Considering the following behavioral equations:T=t0+t1Y , C=c0+c1Yd , G= ̅G and I=I ̅, what is the multiplier in this economy? Why fiscal policy is in this case called an automatic stabilizer?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following behavioral equations: (18 marks) C=c0 +c1YD T=t0 +t1 Y YD = Y –...
Consider the following behavioral equations: C=c0 +c1YD T=t0 +t1 Y YD = Y – T G and I are both constant. Assume that t1 is between 0 and 1. (1) Solve for equilibrium output and equilibrium taxes. (2) What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is 0 or when t1 is positive? Explain. (3) Why is the fiscal policy in this case called an automatic stabilizer? Now suppose that the government...
[In all cases in which you are asked to illustrate with a graph, be sure to...
[In all cases in which you are asked to illustrate with a graph, be sure to draw it carefully and clearly label all curves and axes.] Suppose that: C = c0 + c1YD T = t0 + t1Y [0 < t1 < 1] YD = Y – T That is, taxes now consist of a combination of lump-sum taxes (t0) and income taxes (t1Y). G and I are determined exogenously. a) Solve algebraically for equilibrium output. That is, derive the...
23-The relationship between households' planned consumption expenditures and households' level of disposable real income is called...
23-The relationship between households' planned consumption expenditures and households' level of disposable real income is called the investment function. the savings function. the household aggregate demand function. the consumption function. 25-Of the relationships below, which is the least stable? Investment Net exports Consumption Saving 28-In the multiplier process successive rounds of spending get smaller and smaller because the mps equals 0. mps is negative but less than -1. mps is positive and equals 1. mps is positive and less than...
1) Open market purchase will result in: increase in bank reserves and a decrease in the...
1) Open market purchase will result in: increase in bank reserves and a decrease in the federal funds rate. increase in bank reserves and an increase in the federal funds rate. decrease in bank reserves and a decrease in the federal funds rate. decrease in bank reserves and an increase in the federal funds rate. 2) An increase in government expenditure would shift the: A) aggregate demand curve rightward. aggregate demand curve leftward. aggregate supply curve rightward. aggregate supply curve...
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...
2) Consider the following economy with an income-tax rate of 20% as well as fixed (or...
2) Consider the following economy with an income-tax rate of 20% as well as fixed (or lump-sum) taxes of 50 and where the level of Government expenditure is fixed in part but also increases during recessions and thus is negatively related to the level of aggregate output. (For example this would be the case when government programs like employment insurance and job-retraining are in higher demand during recessions, when incomes are low, than during booms when incomes are high.) Z...
Principles of Macroeconomics Q.1 In the short run, firms expand their production when the price level...
Principles of Macroeconomics Q.1 In the short run, firms expand their production when the price level rises because A.the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. B. each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. C.firms can increase their profits by increasing their maintenance. D.the money wage rate remains constant so the higher...
Question 25 State sales taxes tend to be regressive in that higher income-people save and invest...
Question 25 State sales taxes tend to be regressive in that higher income-people save and invest rather than consuming all their income like lower-income people, so they pay a lower portion of their income on sales taxes which are consumption based. To offset this regressivity, most state sales tax rules do what? Base sales tax rate on the level of income of the purchaser. Rebate excess sales taxes paid to low income taxpayers on application. Exempt certain necessities that all...
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose...
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose that MPC = 0.75 and the marginal tax rate ?=0.2. Then, when ? decreases by 1000, then for any given interest rate, the IS curve shifts: Select one: a. to the left by 1000. b. to the right by 3000. c. to the right by 3750 d. to the right by 1875. 2. Suppose that the adult population in an economy is 28 million,...
The information below describes the current state of the economy for the Kingdom of Westeros. All...
The information below describes the current state of the economy for the Kingdom of Westeros. All coefficients (e.g. m0) represent positive constants, and c is bounded between 0 and 1. T is lump sum tax. Assume prices are fixed in the short run. Real money demand: 0 ( , ) L r Y m kY hr =+− Real money supply: 0 sM z P = Consumption: 0 () C C c Y T = + − Learning Objective in this...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT