If the consumption function is C=800+ 0.6(Y-7), output, Y,= $3,100 and net taxes, T, = $100, then consumption = $2,600. (Round your response to the nearest For the data in the following table, the consumption function is C= 800+ 0.6(Y-T). Fill in the columns in the table and identify the equilibrium output. The equilibrium output is $ Output $2,100 2,600 3,100 3,600 4,100 4,600 5,100 Net Taxes $100 100 100 100 100 100 100 Disposable Consumption Income Spending Saving $ $ $ Planned Investment Planned Unplanned Aggregate Inventory Expenditure Change $ $ Government Purchases Spending $300 $400 300 400 300 400 300 400 300 400 300 400 300 400

If the consumption function is C=800+ 0.6(Y-7), output, Y,= $3,100 and net taxes, T, = $100, then consumption = $2,600. (Round your response to the nearest For the data in the following table, the consumption function is C= 800+ 0.6(Y-T). Fill in the columns in the table and identify the equilibrium output. The equilibrium output is $ Output $2,100 2,600 3,100 3,600 4,100 4,600 5,100 Net Taxes $100 100 100 100 100 100 100 Disposable Consumption Income Spending Saving $ $ $ Planned Investment Planned Unplanned Aggregate Inventory Expenditure Change $ $ Government Purchases Spending $300 $400 300 400 300 400 300 400 300 400 300 400 300 400

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the consumption function is given by C = 150 + 0.85(Y – T)and the tax function is given by T = t0 + t1Y where C = Consumption, Y = Total output/income, t0 = Autonomous/fixed tax and t1 = Tax rate. If t0increases by 1 unit, then explain whether consumption will be increased or decreased, and how much?
Suppose an economy is represented by the following equations.Consumption function C = 200 + 0.8YdPlanned investment I = 400Government spending G = 600Exports EX = 200Imports IM = 0.1YdAutonomous Taxes T = 500Marginal Tax Rate t=0.2Planned aggregate expenditure AE = C + I + G + (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy
C = 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
The President of Westeros hires you as an economic consultant. He is concerned that theoutput level in Westeros is too high and that this will cause prices to rise. He feels that it isnecessary to reduce output by $10 billion. He tells you that the MPC in Westeros is 0.6.Which of the following would be the best advice to give to the Westeros president?A) reduce government purchases by $4 billionB) increase taxes by $10 billionC) reduce government purchases by $10 billionD) increase taxes by $2.5 billion
Assume that, without taxes, the consumption schedule for an economy is shown below: GDP, Billions Consumption, Billions $100 $120 200 200 300 280 400 360 500 440 600 520 700 600 Graph this consumption schedule and determine the size of the MPC. Assume that a lump-sum (regressive) tax of $10 billion is imposed at all levels of GDP. Calculate the tax rate at each level of GDP. Graph the resulting consumption schedule and compare the MPC and the multiplier with those of the pretax consumption schedule. Now suppose a proportional tax with a 10 percent tax rate is imposed instead of the regressive tax. Calculate and graph the new consumption schedule and note the MPC and the multiplier. Finally, impose a progressive tax such that the tax rate is 0 percent when GDP is $100, 5 percent at $200. 10 percent at $300, 15 percent at $400, and so forth. Determine and graph the new consumption schedule, noting the effect of this tax system…
If the consumption function is C-800+0.6(Y-T), output, Y,= $2,100 and net taxes, T.-$100, then consumption=S For the data in the following table, the consumption function is C-800+0.6(Y-7). Fill in the columns in the table and identify the equilibrium output. The equilibrium output is s Output $2,100 2,600 3,100 3,000 4,100 4,600 5,100 Net Taxes $100 100 100 100 100 100 100 Disposable Consumption Income Spending $ Saving H (Round your response to the nearest whole number) Planned Aggregate Spending Purchases Expenditure $300 $400 300 400 300 400 300 400 300 400 300 400 300 400 Planned Investment Government Unplanned Inventory Change
C = 450 + 0.4YI = 350G = 150X = 70Z = 35 + 0.1YT = 0.15YYf = 1550(Hint: use the multiplier method)Q.2.4 Calculate the tax revenue to the government of this country when the economyremains in equilibrium.Q.2.5 Calculate what the new equilibrium income should be if the government of thiscountry decides to cancel all taxes, implying the tax rate would now be 0%.Q.2.6 Before the government decreased the tax rate, how much of governmentspending was required to bring the economy to full employment?
Consider the following economy: C = 300 + 0.8 (Y – T) I = $300 G = $200 and T = $250 What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10? What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?
Why will a temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a) Because people viewed the tax increase as permanent. b) Because people chose to increase their saving. c) Because people viewed the tax increase as temporary. d) consumption expenditures are not related to the level of taxation.
1. Consider an economy with the initial equilibrium income level of $1000 and the consumption function of C = $150 + 0.6 (Y - T). Find the following quantities:a. Government expenditures at the equilibrium level of income if T = $160 and I = $100.b. The change in income produced by increasing taxes 10%, provided that G and I remain unchanged. What is the tax multiplier?c. The change in income produced by increasing government expenditures 10%, provided that T and I remain unchanged. What is the government spending multiplier?d. Based on your answers to (b) and (c), does the balanced budget multiplier theorem hold?
Q.3 Suppose that the consumption function is defined as C=a+b(1-k)Y -bT a-bT 0 and both lump-sum tax (T) and tax rate (k) are constant. This consumption function yield: where A. MPC will decrease as income increase since a-bT 0 B. MPC will increase as income increase C. APC will decrease as income increase D. APC will remain the same as income increase E. APC will increase as income increase
Suppose a closed economy with no government spending which in equilibrium is producing an output and income of 2500. Suppose also that the marginal propensity to consume is 0.80, and that, if at full employment, the economy would produce an output and income of 3900 By how much would the government need to cut taxes (T) to bring the economy to full employment?