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Suppose the government is considering a tax policy that will reduce taxes by $100. In the economy, household consume 80% of each additional dollar earned. Assume that the tax cut has no effect on GDP (Y).
a) How will this tax affect consumption?
b) Calculate the change in private savings
c) Calculate the change in government savings and national saving
d) What will happen to the current account as a result of this policy?
e) How would your previous answers change if we assume Ricardian equivalence?
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When the US. Treasury sells bonds, the money supply does not increase, while when the Central Bank sells bonds, the money supply contracts. Explain why?
q1. illustrate trade-off must be considered when deciding explain how much of your wealth is to be held as money
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Weights of newborn babies in the United States are normally distributed with a mean of 3420 grams and a standard deviation of 495 grams. A newborn weighing less than 2200 grams is considered to be at risk. What fraction of newborn babies are in the “..
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