homework5fall2007

# homework5fall2007 - Economics 102 Fall 2007 Homework#5 Show...

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Economics 102 Fall 2007 Homework #5 Show your work for full Credit. You should attach your work if there is not enough room to fit your answers on this sheet. 1. Complete the following table, and answer the questions that follow. Taxes are proportional to income, so T = tY. Assume that there are NO TRANSFERS. Hint: You should consider using the slope formula to calculate MPC. Y T Y-T C S 15 45 56 100 80 125 300 a) Determine the progressive tax rate t. b) Determine the consumption and saving functions with respect to disposable income, and with respect to aggregate income. c) Given the consumption function you determined in part (b), the tax rate you found in part (a), and the following information about the economy, determine the equilibrium output: I = 130 G = 100 + .16T X = 250 M = 200 d) Given equilibrium output, determine the equilibrium levels of consumption, savings, taxes, and government spending.

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e) Is the government running a deficit or a surplus? Are there capital inflows or outflows?
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