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Unformatted text preview: T = 0.5Y a. Draw a graph to show how Y is determined. What is the value of the intercept of the demand line? What is its slope? b. Calculate the value of equilibrium output, taxes, and the government deficit, which is GT. c. Suppose I increases by 10. How much does GDP increase? d. Starting from the original equilibrium, what happens to the deficit when I increases by 10? e. Starting from the original equilibrium, what happens to the deficit when G increases by 10? 6. Explain how the following affect the fiscal multiplier. a. an increase in tax rates b. an increase in the marginal propensity to import c. a decrease in the marginal propensity to save d. having investment spending also depend on income (e.g. I = I + dY, where d is positive) 7. Do problem 3.6 and 3.7 and problem 5.6 (both editions)....
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This note was uploaded on 09/25/2011 for the course ECN 001B taught by Professor Staff during the Fall '09 term at UC Davis.
 Fall '09
 Staff
 Macroeconomics

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