What is the multiplier

Assignment Help Microeconomics
Reference no: EM13663911

We have been assuming that the fist policy variable T is independent of the level of income. In the real world, however, this is not the case. Taxes typically depend on the level of income, so tax revenue tends to be higher when income is higher.
IN this problem, we examine how this automatic response of taxes can help reduce the impact of changes in autonomous spending on output. Consider the following model of the economy, where G and I are both constant. C = c0+ c1YD T = t0+ t1Y YD= Y - T

a.Is t1 greater or less than one? Explain.
b.Solve for equilibrium output.
c.What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is zero or when t1 is positive? Explain.

Reference no: EM13663911

Questions Cloud

Activity on probable cause : Activity on Probable Cause
Describe the key characteristics of a whistleblower : Describe the key characteristics of a whistleblower
An analysis of budget line items : An analysis of budget line items, costs, sources of revenue, and deficits
List examples of flows of real or physical factors : 1) list examples of flows of real or physical factors between government and households:
What is the multiplier : What is the multiplier?
Consider a decline in real gdp : Consider a decline in real GDP
Preserved in an economically efficient scenario : Preserved in an economically efficient scenario?
Explain the mechanisms : Explain the mechanisms
The lmn partnership has a group term life insurance plan : The LMN Partnership has a group term life insurance plan

Reviews

Write a Review

Microeconomics Questions & Answers

  The bioecological model of human development consists of

the bioecological model of human development. the bioecological model of human development has four basic systems.

  What will the consumer do to arrive at a new equilibrium

For which types of business organization is unlimited liability going to apply to - a sole proprietorship, a partnership or a corporation? Now explain out of those business organizations, for which one will unlimited liability be the greatest prob..

  Price discrimination and antitrust

What are the types of circumstances under which price discrimination violates antitrust? Use the handout to illustrate your answer (examples included in Section 15.5 – Antitrust: Price Discrimination and the Robinson-Patman Act).

  Determine the equilibrium price and quantity

Calculate the equilibrium price and quantity. Sketch the supply and demand curves on a graph indicating the equilibrium.

  The tax rate is 25 determine the marginal propensity to

1 the following data applies to the economypersonal incomeconsumption100007000120008000140009000the tax rate is 25.

  Domestic energy production and gdp

If we are able to increase our domestic energy production, and that allows us to import less oil from foreign countries, briefly explain what will happen to the GDP.

  Profit maximization for perfect competition

In the competitive market at a price of $50 and cost function of C=50+5Q2 find out the maximum profit? Show how the solution was reached.

  Develop production from the opportunity

Demonstrate that the expression on the right in fact represents the sum of the series on the left, Draw an appropriate cash flow diagram and indicate the formulas and factors used to evaluate the cash flow diagram

  What is the firms profit-maximizing price-quantity

Graph the three different situations of parts (a), (b), and (c). Using your results, explain why there is no real supply curve for a monopoly.

  Write the equation for the new budget constraint

Write the equation(s) for the new budget constraint

  Relationship between short-run and long-run costs

What fraction of its oil consumption does it have to import and is it strange that even though the country is a net importer of petroleum, it exports some petroleum too?

  Expansionary monetary policy in the usa

A South America nation with fixed exchange rate system has close economic ties with USA symbolized through extensive trade and unrestricted flow of capital between two nations.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd