5. Assuming that t0 = 200 find the value of the marginal tax rate that will yield the same level of equilibrium GDP as t
Posted: Thu May 19, 2022 8:29 am
5. Assuming that t0 = 200 find the value of the marginal tax
rate that will yield the same level of equilibrium GDP as the one
obtained (1). (4 points) 6. Find the expression for the investment
multiplier in terms of c1and t1 and possibly c0, and t0. (4 points)
7. Assume now that private investment, I, increases by 50. Find the
change in GDP, ∆Y, induced by the change in investment, ∆I = 50. (4
points) 8. The government does not like the change in GDP induced
by the increase in private in- vestment. It wants to bring it back
to the level found in Question (1). For that purpose, it has the
options to change its spending or to change taxes. (a) If the
government changes its spending alone, find the level of ∆G
required to coun- teract the effect on GDP of the fall in
investment. (4 points) (b) If the government changes instead the
level of its autonomous taxes alone, find the level of ∆t0 required
to counteract the effect on GDP of the fall in investment. Explain
what happened. (4 points) (c) How does ∆G compare to ∆t0? Explain
the difference, if there is any. (4 points) (d) In which direction
should the government change its marginal tax rate, t1 (increase or
decrease), if it uses it as the sole policy instrument to
counteract the effect of the change in investment? Explain
intuitively your answer. (4 points)
rate that will yield the same level of equilibrium GDP as the one
obtained (1). (4 points) 6. Find the expression for the investment
multiplier in terms of c1and t1 and possibly c0, and t0. (4 points)
7. Assume now that private investment, I, increases by 50. Find the
change in GDP, ∆Y, induced by the change in investment, ∆I = 50. (4
points) 8. The government does not like the change in GDP induced
by the increase in private in- vestment. It wants to bring it back
to the level found in Question (1). For that purpose, it has the
options to change its spending or to change taxes. (a) If the
government changes its spending alone, find the level of ∆G
required to coun- teract the effect on GDP of the fall in
investment. (4 points) (b) If the government changes instead the
level of its autonomous taxes alone, find the level of ∆t0 required
to counteract the effect on GDP of the fall in investment. Explain
what happened. (4 points) (c) How does ∆G compare to ∆t0? Explain
the difference, if there is any. (4 points) (d) In which direction
should the government change its marginal tax rate, t1 (increase or
decrease), if it uses it as the sole policy instrument to
counteract the effect of the change in investment? Explain
intuitively your answer. (4 points)