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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
Marginal propensity to SPEND refers to: a. a nation's additional spending on a good per an additional unit of expenditure. b. a nation's additional consumption based on a unit incr
As is the case with the supply and demand function for a single business firm determining the equilibrium price and output for its product, the aggregate supply and aggregate deman
Example of Fixed Investment-ACCOUNTING SYSTEM Consider again the economy in example III. An inventor offers to construct some machines for each of the three companies which wo
Functions of a Commercial Bank 1. Credit Creation Creation of credit is a major function of a commercial bank. When a bank creates credit or advances loans, there tends
What is crowding out?
Only two identical firms i = A;B, each with marginal cost MCi = 40 and no fixed cost, operate in a market with demand: Q p 1 160 2 120 3 90 4 70
RATCHET EFFECT
Suppose the potential level of real domestic output (Q) for a hypothetical economy is $160 and the price level (P) initially is 200. Use the following short-run aggregate supply
Classify each of the following as employed, unemployed, or not in the labor force. a. Beth is not working; she applied for a job at Wal-Mart last week and is awaiting the result
Table below shows the descriptive statistics which have been condensed from the data sheet for the period 1987 Q4 to 2011 Q3. GDP (%) Real Exchan
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