Concerning the government budget constraint and the impact of cutting taxes on investment - if the government cuts taxes and funds this tax cut by cutting government spending in the same period is it right to say that government saving doesn't change but private saving will as consumers will receive this permanent tax cut - thereby increasing the income flow increasing consumption.

Suppose that the government expenditure multiplier is equal to 6. By how much should the government decrease government expenditures (G) in order to close this inflationary gap?

Why will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expected

Using taxes as a function of income, derive and explain the investment multiplier

Economists often argue that a large increase in government purchases – such as for the military – will crowd out private-sector spending. Use the investment-saving diagram to defend or to refute their premise.

Governments attempt to stimulate economies by offering firms temporary investment tax credits. Explain the effects of this measure on investment spending. Would you expect a permanent or temporary measure to have more effect.

Question #10 - Suppose the government wishes to eliminate an inflationary gap of $100 billion and the MPC is 0.50. How much must the government cut its spending? Instead of decreasing government spending by the amount you calculate, what would be the effect of the government increasing taxes by this amount?

V1         Consider the following information for a country:   Consumption function: C = 85+0.8Yd   Investment function: l = 85   Government spending: G=60   Net taxes: T = -40+0.25Y   Disposable Income: Yd = Y - T   Equilibrium: Y = C + l + G   The level of equilibrium income, Y, = $_____(Enter response rounded two decimal places)   The government collects net taxes of $_____   Remember the budget surplus is equal to taxes minus government spending,   The governments budget surplus is $____

a. Suppose the government increases both taxes (7) and government purchases (G) by equal amounts. Assuming income (Y) is fixed by the factors of production, the change in national saving (AS) will be (MPC-1) * AT. (1-MPC) x AT. b. The larger is the MPC (the closer it is to 1), the will be the increase in the interest rate. will be the decline in investment, and the

For the last time, consider the economy described above. You won't work directly with its numbers in this question, but I'm repeating them in case it's helpful: Government purchases $1000 Transfer payments $0 (none in this economy) Net taxes = $1500 Output (income) = $8000 Consumption = $3500 Let's say the MPC 0.8 and the government gives a tax cut of $50. As a result, private savings will [ Select ) . public savings will I Select V and this [ Select) Va good idea to stimulate economic investment.