Question

Course: Section: Name: Task 5: Suppose that the government wants to promote full employment through the use of taxes. Should it raise or lower taxes? Explain your answer carefully. Task 6: Suppose that the government wants to promote full employment through the use of government spending. Should it increase or reduce government purchases? Explain your answer carefully.

Answer 1

5. In order to promote full employment through the use of taxes, the government must reduce taxes so that the disposable income increases in the economy leading to increase in aggregate demand. This will ultimately boost up production and more labor inputs will be employed.

6. the government can increase government spending to promote full employment. An increase in government spending will shift forward the aggregate demand in the economy and thereby, increasing income and employment levels.

--------

MR is calculated as the ratio of change in TR to change in Q. Here, change in Q is equal to 1 at each level, thus MR can simply be calculated as the change in TR.

Similarly, MC can be calculated as a change in TC.

Q	TR	TC	MR	MC
0	0	3	-	-
1	6	5	6-0 = 6	5-3 = 2
2	12	8	12-6 = 6	8-5 = 3
3	18	12	18-12= 6	12-8 = 4
4	24	17	24-18 = 6	17-12 = 5
5	30	23	30-24 = 6	23-17 = 6
6	36	30	36-30 = 6	30-23 = 7
7	42	38	42-36 = 6	38-30 = 8
8	48	47	48-42 = 6	47-38 = 9