Government in the cross model, Macroeconomics

Assignment Help:

The government in the cross model

Net taxes NT(Y) depends positively on real GDP in the cross model

In this model when national income increases, amount individuals pay in income taxes will increase. This is since income tax is specified as a percentage of total income. Other taxes may also increase when Y increases. Though government transfers to households will decrease. Thus net taxes NT will increase when Y increases. 

Albeit NT depends on Y, is still under the control of government. NT may change even if Y doesn't change. This means that NT is part exogenous (as it may be controlled by the government) and part endogenous (as it would automatically change when Y changes). Thus we write NT(Y) but we should remember the exogenous nature of net taxes. Government savings, which is also part exogenous and partendogenous, depends positively on Y and we write: 

SG(Y) = NT(Y) - G


Related Discussions:- Government in the cross model

Uninsured patients are expected to pay, A radiology firm charges $2,000 per...

A radiology firm charges $2,000 per exam. Uninsured patients are expected to pay list price. How much do they pay?

Classical model, why and how is price level determined by the monetary sect...

why and how is price level determined by the monetary sector in the classical model?

Eco 372, what does a weaker dollar to a) raise inflation and contract the e...

what does a weaker dollar to a) raise inflation and contract the economy b) reduce inflation and contract the economy c) raise inflation and expand the economy d) reduce inflation

Pros and cons of using monetary policy, The monetary system in any economy ...

The monetary system in any economy facilitates trade and allows people to trade more efficiently, as compared to a barter economy. In the United States, the monetary authority is t

Electrical company audit indicates that motor consumption, An electrical co...

An electrical company audit indicates that motor consumption is 4x106 kWh per year. By upgrading to high efficiency motors a 10% savings can be made. The additional cost for the mo

Dynamic Multiplier, Discuss the concept of dynamic multiplier.

Discuss the concept of dynamic multiplier.

Explain the basic characteristics of IS-curve, Q. Explain the basic charact...

Q. Explain the basic characteristics of IS-curve? IS-LM diagram IS-curve The IS curve shows all combinations of R and Y where the goods marketis in

Wto negotiations, WTO Negotiations: As is obvious from the above expla...

WTO Negotiations: As is obvious from the above explanation  that India has favoured multilateral trade reforms ever since the time of GATT (1947) to WTO (1995). Currently WTO

Money and Banking, What is the relationship between deposit multipier,Credi...

What is the relationship between deposit multipier,Credit Multiplier and Deposit multiplier?

Write Your Message!

Captcha
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