Reference no: EM137617

Assume Yn = 11,600, t=0.2, as well as G = 2,610.

a) Compute the amount of taxes at natural real GDP.

b) Clarify why there is a natural employment deficit. Calculate the amount of the natural employment deficit in terms of both billions of dollars as well as as a percent of natural real GDP.

c) Assume that the goal of fiscal policymakers is to reduce the size of the natural employment deficit to 1 percent of natural real GDP. Calculate what the size of the natural employment deficit must be in terms of billions of dollars in order for fiscal policymakers to achieve their goal.

d) Given no change in the tax rate, Calculate by how much fiscal policy makers must cut government spending in order to accomplish their goal.

e) Given no change in government spending, Calculate by how much fiscal policy makers must increase the tax rate in order to accomplish their goal.

f) Given the objective of fiscal policymakers, clarify what action monetary policymakers must take for the actions of fiscal policymakers to have no effect on real income.

g) Assume that private saving increases as the interest rate increases. Given the fiscal-monetary policy mix describe in parts c-f, Clarify whether national saving increases by an amount that is larger than, equal to, or less than the decrease in the natural employment deficit.