EC111Class12Questions

EC111Class12Questions - b Derive an expression for the...

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EC111 MACROECONOMICS Spring Term 2012 EC111 Class Exercise 12 1. A macroeconomy is described by the following relationships: Consumption: C = A + cYd Direct tax: Td Government expenditure: G Investment: I a) Find the multiplier for investment in this economy. b) Derive the balanced budget multiplier for this economy. c) Explain why the balanced budget multiplier is 1. 2. The macroeconomy is now described by the following relationships: Consumption: C = A + cYd Direct tax: Td = t d Y Indirect tax: Te = t e Y Government expenditure: G Investment: I a) Find the multiplier for this economy and compare it with 1 (a) above.
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Unformatted text preview: b) Derive an expression for the government budget deficit. c) Suppose that: A = 100; c = 0.7; t d = 0.25; t e = 0.15; G = 300; I =100. Find equilibrium national income and the budget deficit. d) How does national income and the budget deficit change if a (in the consumption function) falls to zero? 3. In the context of the recession following the Global Financial Crisis, discuss the implications of: a) automatic stabilisers b) fiscal stimulus packages c) rising public debt....
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.

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