(1) At equilibrium, Y = C + I + G
=> Y = 150 + 0.8DI + 50 + 200
=> Y = 400 + 0.8 (Y - T + Tr)
=> Y = 400 + 0.8Y
=> Y - 0.8Y = 400
=> 0.2Y = 400
=> Y = (400 / 0.2)
=> Y = 2000
Equilibrium Y is $2000
Answer: Option (D)
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(2) Budget defict means government tax revenue is lower than government spending
National debt =Sum of budget deficit - Sum of budget surplus.
A decrease in tax will increase the budget deficit as well as national debt.
Answer: Option (B)
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(3) No, federal budget should not be balanced each fiscal year.
Because it can be in a deficit (i.e., decrease taxes and incerease government spending on social welfare) during recessions and offset by surpluses (i.e., increase taxes and decrease government spending on welfare) when the economy is doing well.
Answer: option (D)
Use the following information to determine the equilibrium Y in a 3-sector model: Y = C+I+G...
Which of the following equations are correct? . for the three-sector model: Y =C+I+G • EX = IM+S foreign • I = S+Sp+S + Sforeign • for the two-sector model: W+TR, =C+SH • government expenditures: G+TR, +TR+I • deficit if T-G-TRy -TR, <0.
Question 3: Multiplier Model (20 Points] Suppose the components of a closed economy can be described by the following set of equations: Y=C+I+G C= 1200 +0.8 (Y-T) I = 750 G = 900 T=950 (a) Is the government currently running a balanced budget, a budget deficit or a budget surplus? Explain. [3 Points (b) Calculate the equilibrium income. [6 Points) (c) Graphically illustrate, using the Keynesian Cross Diagram, the effect of a decrease in government spending on equilibrium output. [5...
1-5
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1. Points = 18. Consider National-Income Model: National Income: Consumption: Investment: Government Sector: Taxes: Y=C+I+G C = a + b (Y-T) I=k+rY G=Go T=f+jY 0<b<1 (<r<1 a> 0 in mln dollars; k>0 in mln dollars; Go >O in mln dollars p> 0 in mln dollars; 0<j<1 1) Discuss in words the meaning of each of the equations in the model (3 points); 2) Find the equilibrium level of GDP (Y) in reduced form (3 points); 3) If we know the...
5 to 10
We have the following model of the economy () Y-C+S+T (2) E CI+G G-GA (8) T-TA 9) YD -Y - T (10) Defict G-T (4) C-(YD CA) (5) S=s(YD-SA) (6) I IA The following data for equilibrium values will help in this problem G= 80 300 S 450 T 650 Calculate 1. the equilibrium value of consumption 2. marginal propensity to consume (AC/AY) 3. the expenditure multiplier MPC t budget now has an imbalance of . This...
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M.4
1. Suppose the United States economy is represented by the following equations: Z=C+I+G YD=Y-T I = 30 C = 100 + 5YD G= 100 T = 200 a) Which variables are endogenous and which are exogenous? b) Calculate equilibrium levels of output, consumption and disposable income c) What is the multiplier for this economy d) What is the effect of increasing G by $100 on Y and the deficit
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