econ101fall11ps4

# Econ101fall11ps4 - Name Section T.A Name 180.101 ELEMENTS OF MACROECONOMICS Fall 2011 Problem Set#4 Prof Louis J Maccini INSTRUCTIONS Above write

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Name: Section: T.A. Name: 180.101 ELEMENTS OF MACROECONOMICS Fall, 2011 Problem Set #4 Prof. Louis J. Maccini INSTRUCTIONS: Above, write your name, section number and T. A. name. Answer each question in the space provided, or on the back of the same sheet. 1. Consider an economy in which tax collections are always \$400 and in which the three components of aggregate demand are as follows: GDP Taxes Disp. Income C I G \$1,360 \$400 \$960 \$720 \$230 \$500 1,480 400 1,080 810 230 500 1,600 400 1,200 900 230 500 1,720 400 1,320 990 230 500 1,840 400 1,440 1080 230 500 Find the equilibrium of this economy graphically. What is the marginal propensity to consume? What is the multiplier for government purcahses? What would happen to equilibrium GDP if government purchases were reduced by \$60 and the price level remained unchanged?

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2. Consider an economy similar to that in the preceding question in which investment is also \$230, government purchases are also \$500 and the price level is also fixed. But taxes now vary with income and, as a result, the consumption schedule looks like the following: GDP Taxes Disp. Income C \$1,360 \$320 \$1,040 \$810 1,480
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## This note was uploaded on 01/12/2012 for the course ECON AS.180.101 taught by Professor Maccini during the Fall '08 term at Johns Hopkins.

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Econ101fall11ps4 - Name Section T.A Name 180.101 ELEMENTS OF MACROECONOMICS Fall 2011 Problem Set#4 Prof Louis J Maccini INSTRUCTIONS Above write

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