Exercises5 - y × What is the interpretation of the new parameters and Draw and solve for the consumption function in each case 2(a What will

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Practice Exercises on Chapter 5 1. Incorporate government transfer payments TR explicitly into the model we have studied in class. Since transfer payments augment disposable income they will enter as follows: Y D = + (1 – t ) × Substitute the new disposable income function in the consumption function. Consider two cases: (a) when transfers are lump sum, i.e. TR = TR 0 , and (b) when transfers are a linear function of income, i.e., – TR
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Unformatted text preview: y × . What is the interpretation of the new parameters and ? Draw and solve for the consumption function in each case. 2. (a) What will happen to investment if the corporate tax rate increases 10%? (b) What will happen to investment if the government subsidizes borrowing for investment purposes at a rate of s% per unit of funds borrowed? 3. Policy Exercises from text book (p.168): 1, 2, 3, 5, 6...
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This note was uploaded on 04/17/2010 for the course LAPS ECON2350 a taught by Professor Barrysmithandtasso during the Spring '10 term at York University.

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