EC202-A3S10

# EC202-A3S10 - Question Four What will happen to the IS...

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EC 202(01) - Assignment # 3 - S10  Question One o Assume national income (Y) increases by \$50 o So ∆Y = \$50 o MPC out of Y d o = ∆ C d /∆Y d    = 0.70 o and o Y d = Y - T o Marginal tax rate (MTR) o change in taxes per dollar change of Y o =   ∆ T/∆Y o =   0.30 Solve for: ∆T  ∆ Y d ∆C d    MPC out of Y Question Two Explain how an increase in government spending that is financed by borrowing affects consumption,  private saving, government saving and national saving.   Assume that: o G increases by \$20 o MPC out of Y d  = 0.60 o C d  falls by \$1 because of the anticipated increase in future taxes. Question Three Explain how a decrease in lump sum taxes will affect desired consumption.

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Unformatted text preview: Question Four What will happen to the IS curve if the expected future marginal product of capital MPK f declines. Explain using diagrams. Question Five What will happen to the LM curve if there is an increase in M, the nominal money supply? Explain using diagrams. Question Six EC 202(01) - Assignment # 3 - S10 2 Suppose that initially the economy is in general equilibrium in the classical model. Describe the effects of a beneficial supply shock. Question Seven What will happen to the IS curve if there is a decrease in G (other things being equal including Y)?...
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## This note was uploaded on 07/12/2010 for the course ECON 202 taught by Professor Angelatrimarchi during the Spring '10 term at Waterloo.

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EC202-A3S10 - Question Four What will happen to the IS...

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