This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Econ 203 Tutorial #4 Date: Week of Feb. 612 Coverage: Chapter 7 Government, Fiscal Policy and Real GDP 1. Consider the following information on the economy of Pluto: C = 150 + 0.8 Y I = 350 (i) Find the equilibrium national income Y. (ii) Find the multiplier and the value of savings (S). (iii) Suppose I increases to 450. Find the new Y and C. (iv) A government is now put in place in Pluto, with I still equal to 450. The government spends an amount G=150 and imposes a tax T=150. Only consumers pay the tax. What is the new equilibrium Y? (v) Do you like the way how T is modelled? Explain. (vi) Now suppose T=0.2Y. Only consumers pay the tax. Find the new multiplier. Explain intuitively why this new multiplier is larger/smaller than the one you found in part (ii). (vii) Use the relevant accounting identities to find the relationship amongst the variables S, I, T and G. Provide an intuitive explanation for your answer. What variables are leakages and what variables are injections?...
View Full
Document
 Spring '09
 IANIRVINE

Click to edit the document details