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Q1. Assume the government decides to fight obesity in America by imposing an excise tax on the saturated fat content of food. The effect of this tax would be to
Q2. Consider a simple Keynesian income-spending model of an economy described by the following equations
C = 210 + 0.75YdI= 300G= 425TR= 120T= 100M = 0.15YX= 220
(a) Compute the equilibrium level of income. Sketch this equilibrium position using a two-dimensional graph.
(b) Assume the government reduces public expenditure by 50. Estimate the change in the equilibrium level of income? Illustrate what is the new equilibrium level of income?
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The Federal Reserve Bank of St. Louis maintains a Web page devoted to international economic trends.
What percent of the tax is borne by buyers. If income rises to $40,000, how much will tax revenue rise.
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