Homework 6.docx - Question 1 3 3 pts The answer directly...

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Question 13 / 3 ptsThe answer directly below the words correct answer is the correct answer.Consider the following modeli) C = 1650 + mpc (Y - tY)ii) I = 800iii) G = 500iv) X - M = 500 - mpi (Y)where:t = the (flat) tax ratempc = the marginal propensity to consumempi = the marginal propensity to importsuppose mpc = .60, t = .15, mpi = .2Given the information above, solve for the equilibrium output:Y* = 5500 Correct!Y* = 5000 Y* = 1650 Y* = 3450 Y = C + I + G + X-MY = 1650 + mpc(1-t)Y + 800 + 500 + 500 - mpi YY - mpc(1-t)Y + mpiY = 3450Y [ 1 - mpc(1-t) + mpi ] = 3450Y = 1 / [1 - mpc(1-t) + mpi] X 3450Y = 1 / [1 - .6(1-.15) + .2] X 3450
Y = 5000
Question 23 / 3 ptsWe know that the formula for the (government) spending multiplier is 1/(1-[mpc(1-t) - mpi]). The value of the government spending multiplier in this problem is: Round to 2 decimal places.
Question 33 / 3 ptsWhen we discussed the multiplier we discussed the impact effect. For example, suppose that G increasesby 100 to 600 and we assume, as we often do, that firms match the increase in demand by increasing Y by 100. In round two, this is an increase in income of 100 to consumers. We will trace out exactly where this 100 increase in income goes in the second round. Recall, there are three leakages to address (via taxes, imports and savings).Given that t=.15, we know that .15 of every dollar increase in gross income is a leakage due to taxes. Since the increase in income is \$100, we know the leakage due to taxes is:
is leaked out to the purchase of imported goods. Multiplying by 100 we have the following: Y up by 100,
Question 43 / 3 ptsGiven that mpi=.2, we know that .2 of every dollar increase in gross income is a leakage due to imports. Since the increase in income is \$100, we know the leakage due to imports is:\$100 Correct!\$20 \$40 \$80 We have three leakages: tracing out 100: for every additional dollar in gross income, the consumer saves 40 cents since the mpc = .6. The government gets 15 cents since the tax rate is .15. And finally, 20 cents
is leaked out to the purchase of imported goods. Multiplying by 100 we have the following: Y up by 100,