Let be the following data for a hypothetical closed economy: C = 100 + 0.8 Yd (Consumption function) I = 40 (Private inv
Posted: Wed Apr 27, 2022 11:41 am
Let be the following data for a hypothetical closed economy:
C = 100 + 0.8 Yd (Consumption function)
I = 40 (Private investment)
G = 100 (Public expense)
T = 60 + 0,1Y (Gross tax)
B = 50 - 0.05Y (transfer payments)
(a) Calculate the equilibrium income and the values of the other
variables (C, S, T, B) in equilibrium. What is the size of the
budget deficit?
(b) Suppose that the full-time income is Yf = 800. What must be
the tax rate (t) in order to achieve a balanced full-time income?
Calculate the prices of the other variables and the size of the
budget deficit in the new equilibrium.
C = 100 + 0.8 Yd (Consumption function)
I = 40 (Private investment)
G = 100 (Public expense)
T = 60 + 0,1Y (Gross tax)
B = 50 - 0.05Y (transfer payments)
(a) Calculate the equilibrium income and the values of the other
variables (C, S, T, B) in equilibrium. What is the size of the
budget deficit?
(b) Suppose that the full-time income is Yf = 800. What must be
the tax rate (t) in order to achieve a balanced full-time income?
Calculate the prices of the other variables and the size of the
budget deficit in the new equilibrium.