Te model iste c i gc a b y - t y trwherea 60 g , Ask an Expert

Economics

The model is:

TE = C + I + G

C = a + b (Y - t Y + TR)

Where

a = 60 G = 250

b = .8 TR = 200

t = .25 I = 200

a) What is the equilibrium level of national product?

b) What is the government's budget surplus?

c) The government decides to increase the tax rate to balance the budget. Let the change in the tax rate be +.04 (i.e., ?t = +.04). Calculate the Y from this tax rate change. What is the new equilibrium level of Y? What is the budget surplus? Graphically depict the effect of this tax rate change on Total Expenditures.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91273740

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