Using the Keynesian model the effect of an increase in the effective tax rate

# Using the keynesian model the effect of an increase

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9) Using the Keynesian model, the effect of an increase in the effective tax rate on capital would be to cause ________ in the real interest rate and ________ in output in the short run. A) a decrease; a decrease B) a decrease; no change C) an increase; an increase D) no change; a decrease Answer: A 10) Historically, Brazil has suffered higher and more variable rates of inflation than Venezuela. You would expect the short-run aggregate supply curve of Brazil to be ________ than that of Venezuela, and the Phillips curve of Brazil to be ________ than that of Venezuela. D II. Short Answer: Please show all your work for full credit. 1. Consider the following economy: Desired consumption: ࠵?!=250+0.5࠵?࠵?500࠵?Desired investment: ࠵?!=250500࠵?Real money demand: ࠵?=0.5࠵?500࠵?Full-employment output:࠵?=1000Expected inflation: ࠵?!=a.Suppose that T = G= 200 and that M = 7650. Find an equation describing the IS curve. Find an equation describing the LM curve. Finally, find an equation for the aggregate demand curve. What are the equilibrium values of output, consumption, investment, the real interest rate, and the price level? Assume that there are no misperceptions about the price level. 0
Instructor: Guisinger Spring 2014 Econ 2102.11 3 b.Suppose that T = G= 200 and that M = 9000. Find an equation describing the aggregate demand curve. What are the equilibrium values of output, consumption, investment, the real interest rate, and the price level? Assume that full-employment output is fixed. c.Repeat part (b) for T = G = 300 and M = 7650. - T ) - Y - . r + Y . P = r = r + Y . ).
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