The correct answer is: a)
Reason: the other 3 options are wrong as the impact of tax multiplier is less than that of autonomous expenditure multiplier.
Thanks!
III) Given the income-expenditure model, suppose an exogenous increase in autonomou:s consumption...
A5-10. Suppose the following aggregate expenditure model describes an economy: C = 100 + (5/6)Yd T = (1/5)Y 1 = 200 G = 400 X = 300 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium level of national income....
QUESTION 12 In the aggregate expenditure model if the government of Pasedonia decides to increase government spending by $ 100 billion and to finance this increase in government spending the government of Pasedonia increases taxes by $ 100 billion what effect will this have on the economy? (assume MPC=0.75) O A GDP stays the same OB GDP increases by $ 100 billion OC. GDP will increase by $ 400 billion D.GDP will decrease QUESTION 13 An example of an automatic...
Income Or Output Y Consumption Expenditure C Investment Expenditure I Government Expenditure G Net export Expenditure NX $4,000 3,925 100 100 25 4,100 4,000 100 100 25 4,200 4,075 100 100 25 4,300 4,150 100 100 25 4,400 4,225 100 100 25 4,500 4,300 100 100 25 4,600 4,375 100 100 25 4,700 4,450 100 100 25 4,800 4,525 100 100 25 4,900 4,600 100 100 25 5,000 4,675 100 100 25 a) Determine equilibrium level...
ONLY 5-11 BELOW A5-10. Suppose the following aggregate expenditure model describes an economy: C = 100 + (5/6)Yd T = (1/5)Y I = 200 G = 400 X = 300 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium level...
A simple Macro economy economic model is presented by the following information: Consumption expenditure = 1200 + 0.9YD Disposable Income (YD) = Y – NT Net Taxes = 100 + 0.05Y Investment Spending = $600 million; Government Spending = $500 million Exports = $400 million ; Imports = 300 + 0.1Y What is the equilibrium real GDP. If the full employment is at $8000, calculate the recessionary or inflationary gap? Calculate the government expenditures multiplier. Calculate the amount...
Consumption expenditure = $262,619.0 million Planned investment = $86,227.0 million Government expenditure = $113,601.0 million Export expenditure = $99,804.0 million Import expenditure = $97,424.0 million Autonomous taxes = $56,700.0 million Income tax rate = 28% Marginal propensity to save = 0.4 Marginal propensity to import = 0.1 Part (10) Illustrate the GDP gap using the AD-AS Model and the AE Model, if the natural level of income is estimated as $490,000 million. Part (11) If the government wants to close...
For each of the following shocks, identify what component(s) of U.S. planned aggregate expenditure are directly affected and in which direction. a. Income tax rates increase: Which component of planned aggregate expenditure is affected? Consumption Investment Government spending Net exports None of these are affected What happens to planned aggregate expenditure? Increases Decreases Unaffected b. China experiences an economic boom: Which component of planned aggregate expenditure is affected? Consumption Investment Government spending Net exports None of these are affected What...
Problem 4
Consider the following economy:
Consumption Expenditure
446,832 million
Planned Investment Expenditure
346,877 million
Government Expenditure
446,832 million
Exports
402,443 million
Imports
388,374 million
Marginal Propensity to Save
0.3
Marginal Tax Rate
0.32
Autonomous Taxes
301,240 million
Marginal Propensity to Import (nx)
0.04
(a) Calculate the equilibrium level of
income. (0.5 mark)
(b) Calculate autonomous consumption. (0.5
mark)
(c) Calculate autonomous net exports. (0.5
mark)
(d) Calculate autonomous planned
expenditures. (0.5 mark)
(e) Calculate the marginal leakage rate. (0.5
mark)
(f) Assume that the...
Consumption: ?? = 4 + 0.5(? − ?) Investment: ?? = 4 + 0.2? Government expenditure: ? = 30 Tax revenue: T = 0.2? Exports: ? = 7 Imports: ? = 0.02 ? where Cd is consumption on domestically produced goods (remember: total consumption, C=Cd +M), Y is domestic output, G is government expenditure, M is imports, IP is planned investment spending, X is exports, and T is tax revenue. (i) Derive the equation for planned aggregate expenditure (PAE) on...
1. a) In reality, tax revenues are not exogenous, but move positively with income (GDP). Suppose that T = ?̅ + tY, where t is an exogenous tax rate. Use this tax revenue function to derive the government spending multiplier in the following simple model: C = c + c1(Y – T) I = ?̅ G = ?̅ NX = NX0 -mY b) Derive the IS curve for the economy in the above exercise, with I = ?̅ – 20i....