1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption?
Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium values
1 - As a result of the investment tax exemption , the government will try to stimulate the economy. Due to the investment tax exemption declared in the economy , there will be greater scope for investment. Investment is the component of Aggregate demand. Due to rise in AD , the price level will rise in the economy and there will be rise in the real GDP of economy.
2 - Due to the increase in the taxes by the government , the real disposable income of the public will fall. The increased taxes will result in fall in consumption and investment. The fall in consumption and investment will lead to fall in AD and hence the price level and the real GDP in economy will decrease. This will be shown as the leftward shift in the AD curve resulting in lower price level and fall in real GDP.
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment....
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption? Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium...
29. Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption?
28. Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate increases. Illustrate the change in the steady state. What happens to the growth rate of standard of living in the new steady state? 29.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model, what will the effects of this investment tax exemption? 30.Suppose a government decides to increase taxes Using the...
Suppose a government decides to increase taxes. 30. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium values.
Suppose a government decides to reduce spending and (lump-sum) income taxes by the same amount. Using the long-run model of the economy, graphically illustrate the impact of the equal reductions in spending and taxes. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. The direction the curves shift; and v. the terminal equilibrium values. b. State in words what happens to: i. the real interest rate; ii. national saving; iii. investment; iv. consumption;...
4. Using the long-run model of the economy developed in Chapter 3, explain and/or show graphically the impact of increased investment demand has on the economy. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction curves shift; and v. the terminal equilibrium values. Be sure to explain what happens to: i. the real interest rate; ii. national saving; iii. investment; iv. consumption; and v. output. 5. Using the long-run model of...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of the economy developed in Chapter 3, illustrate graphically the impact of the alternative fiscal policy measures indicated in parts (a) and (b) below. Be sure to label: (i) the axes, (ii) the curves, (iii) the initial equilibrium values; (iv) the direction curves shift; and (v) the final equilibrium values. (15) a) Suppose the government decides to reduce the government's budget deficit by reducing government...
5. Use the Simple Classical Macroeconomic Model to answer the following questions c. Suppose the tax cut has not been enough to stimulate sufficient job growth. The government passes infrastructure improvement legislation to increase government spending from $3,000 to $4,000. What is the affect on GDP from the combined changes (Taxes and Spending) in government policies? . Suppose the government decides to spend $3,000 and collect $3,500 in taxes, and investment is equal to $1,500. What would GDP be if...
Answer the following Intermediate Macroeconomics questions: a) Suppose that the large open economy conducts a contractionary fiscal policy (i.e., raising taxes and decreasing government spending), illustrate graphically how the small open economy would be impacted. In your graphs, labeled all your graphs correctly and all terminal equilibrium points and values. b) Based on your graphical analysis, explain briefly what happens to the small open economy net exports, investments, national savings.
QUESTION 7 (25 points): Economic Fluctuation using AD-AS framework Suppose that the short-run aggregate supply curve has a positive slope and that the economy starts at a long-run equilibrium. Now imagine that 10 million people move to Australia they found that Australians live an average of 10 extra years due to the relax lifestyle that they enjoy. This is a permanent change in Labor in the U.S. economy. (a) (10 points) No Policy Intervention: Using the model of Aggregate Demand...