Cutting taxes instead of increasing spending

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Reference no: EM137781

Q. GDP Taxes DI C I G C+I+G
1250 200 800 300 200
1500 200 1000 300 200
1750 200 1200 300 200
2000 200 1400 300 200
2250 200 1600 300 200
2500 200 1800 300 200
2750 200 2000 300 200

1. Calculate the Disposable Income (DI) at each level of GDP.
2. Calculate total spending (C+I+G) at each level of GDP.
3. What is the equilibrium level of GDP in the economy?
4. When the economy is at equilibrium, what is the level of saving?
5. What is the value of the MPC?
6. What is the value of the expenditure multiplier?
7. What is the value of the tax multiplier?
8. If the government increases spending by $100, what would be the new equilibrium value of GDP?
9. If the government wanted to achieve the same change in GDP as in part 8 by cutting taxes instead of increasing spending, how large would the tax cut need to be?

Reference no: EM137781

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