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Consider the following simple model with investment and government spending exogenous:
Y = C + I + G
C = a + bYd
Disposable income Yd is given by Y - T where T is total taxes. Suppose that taxes are not directly related to income, so that T can be increased or decreased independent of income.
a. Derive the change in Y associated with an increase in taxes T. Show the results graphically and algebraically. What is the tax multiplier?
b. Now increase government spending G and taxes T by the same amount. For this change, the balanced government budget deficit G - T does not change. If the budget was balanced before, it will still be balanced. What happens to income Y in this case? Perhaps surprisingly, it increases. Calculate by how much. The result is called the balanced budget multiplier.
There are currently no other airlines providing direct service to Boston Logan airport. Given the number of local students who live in the northeast, United has estimated the inverse-demand for this flight to be P = 500 Q, where Q is the number of se..
Select a news article dated within the previous two months and analyze the issue using the economic concepts and theory learned in this class. Include at least one graph developed in our course.
How much does consumption change this year in absolute dollars ($ ΔC) as a result of a $5,000 annual tax cut to your income, if the tax cut.
We also observe that the proportion of workers receiving disability benefits is much lower in the US than in the latter two nations. Are these findings consistent with the work-leisure model.
One of the major reasons that foreign expatriates have difficulty doing business in the United States is that they do not understand American slang. A business executive recently gave the authors the following three examples of statements that had no..
As your client is intent on investing aggressively, you will want to include the "beta" associated with each instrument relative to the S&P 500 Index.
Consider what you have learned about the root causes, as identified by leading economic thinkers and policymakers.
Demand for a certain for item is given q=200-2p. Where q donated amt and p is price per unit. It cost Rs 5 to produce each unit. What is profit function of firm for this item.
Based on your knowledge of the Commerce Clause, what would happen if a business or individual sued Oregon over Measure 91, arguing that they were injured because their employees are now arriving to work “intoxicated” on legal marijuana?
The government decreases current taxes, while holding government spending in the present and the future constant.
What is the optimal level of output for a monopolist? What is a monopolist price? What is the total profit (or loss)? Show answers to (a), (b), and (c) on a graph that includes demand, MR, and MC.
Suppose SRAS is horizontal as believed by Keynesian economists and is given by P = 110 and that the aggregate demand curve is P =200-2Q. Now suppose that the SRAS shifts upward from P=110 to P = 115. What will happen to the inflation rate? What will ..
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