(Answered) C756yd i125 g81 x25 t-4035y ydy-t m05y note t has a lump

Management Studies

C=75+.6Yd, I=125, G=81, X=25, T=-40+.35Y, Yd=Y-T, M=.05Y (note T has a lump sum component (-40) and component related to Y)

1. What is the tax rate?

2. Solve for equilibrium level of income?

3. What is the value of the government spending multiplier? tax multiplier? (3 decimal places each)

4. At equilibrium, how much does the government collect in taxes?

5. Is the government running a budget surplus or deficit?

6. What is the size of the surplus/deficit?

7. Full employment is when GDP(or Y)=$803. Holding taxes constant, what change in government spending is needed to get full employment?

8. Holding government spending constant, what change in taxes is needed to get full employment?

9. What will be the change in equilibrium GDP if G increases by 100 and T decreases by 100?

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