Let the economy in our numerical example be: C = 70 + 0.75Y I = 60 Y* = 520 Exercise 1: Add government spending G = 100, not financed by taxes by taxes Show that the new equilibrium income is: Y = 920 What is the government spending multiplier? Exercise 2 : Redo your work assuming that: 1. government spending (G: 100) is financed (in part) by a per capita tax 1. public spending (G: 100) is financed (partly) by a per capita tax (capitation) whose total amount is T=80 and, 2. the marginal propensity to consume is applied to disposable income Calculate the new equilibrium income (Y2) and the disposable income (Y ;) What is the multiplier for the government's balance? Exercise 3: If government spending is financed by a 10% income tax and the propensity to consume is applied to disposable income, calculate the equilibrium income (Y2*) (Y2*) and disposable income (Y;) In this case, what is the government's balance of payments multiplier?
Keynesian cross" exercises
Let the economy in our numerical example be:
C = 70 + 0.75Y
I = 60
Y* = 520
Exercise 1:
Add government spending G = 100, not financed by taxes
by taxes
Show
that the new equilibrium income is: Y = 920
What is the government spending multiplier?
Exercise 2 :
Redo your work assuming that:
1. government spending (G: 100) is financed (in part) by a per capita tax
1. public spending (G: 100) is financed (partly) by a per capita tax (capitation) whose total amount is T=80 and,
2. the marginal propensity to consume is applied to disposable income
Calculate the new equilibrium income (Y2) and the disposable income (Y ;)
What is the multiplier for the government's balance?
Exercise 3:
If government spending is financed by a 10% income tax and the
propensity to consume is applied to disposable income, calculate the equilibrium income (Y2*)
(Y2*) and disposable income (Y;)
In this case, what is the government's balance of payments multiplier?
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