EQUATIONS M2 - 1. rGDP = Y [spending = income] 2. rGDP = C...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. rGDP = Y [spending = income] 2. rGDP = C + I [C + I = AE] w/ gov’t, rGDP = C + I +G rGDP = A + MPC X (Y – T + TR) + I + G 3. C = A + MPC x Yd Yd = disposable income w/ gov’t, Yd = Y – T + TR (national income – taxes + transfers) w/only t, Yd=(1-t)Y w/t and T, Yd=[(1-t)Y-T+TR] total gov’t revenue w t and T gov’t revenue tY+T, net tax tY + T - TR C = A + MPC x (Y – T + TR) 4. I= Ip + Iu 5. AEp = C + Ip [planned aggregate expenditure] 6. rGDP = AEp [equil condition, actual expenditure = planned] rGDP = C + Ip + Iu rGDP = AEp + Iu AEp = A + MPC + rGDP + Ip AEp = C + Ip rGDP* = A + Ip/1 – MPC o w/ govt/taxes: rGDP* = 1/1 – MPC(A + Ip + G) + MPC/1 – MPC(TR – T) T= lump-sum taxes (T-TR)= gov’t net lump sum taxes t= income taxes o adding t, rGDP* = 1/1-(1-t)MPC(A + Ip + G) + MPC/1-(1-t)MPC(T-TR) switched T/TR net lump sum taxes are what we multiply by [neg] tax multiplier*** o in terms of changes
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/02/2011 for the course ECON 102 taught by Professor Rossana during the Fall '08 term at University of Michigan.

Page1 / 2

EQUATIONS M2 - 1. rGDP = Y [spending = income] 2. rGDP = C...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online