What level of taxes is needed to achieve an income

Reference no: EM131774441

Question: In the Keynesian cross model, assume that the consumption function is given by

C = 120 + 0.8*(Y-T)

Planned investment is 200; government purchases and taxes are both 400.

a. Graph planned expenditure as a function of income.

b. What is the equilibrium level of income? (Hint: PE = C + I + G and the equilibrium condition is PE = Y. Plug in for consumption, taxes, government spending and investment, and set that equal to Y).

c. If government purchases increase to 420, what is the new equilibrium income? What is the multiplier for government purchases?

d. What level of government purchases is needed to achieve an income of 2,400? (Assume taxes remain at 400.)

e. What level of taxes is needed to achieve an income of 2,400? (Assume government purchases remain at 400.)

Reference no: EM131774441

Questions Cloud

Especially rule making and administrative adjudication : How can implementation, especially rule making and administrative adjudication, affect the daily lives of racial and ethnic minorities?

What is the amount transferred from the retained earnings : What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend

What is the present valuse of the lease payments : If the discount rate is 14%, what is the present valuse of the lease payments?

What is the amount of revenue realized from the sale : A corporation purchased 1,000 shares of its $5 par common stock at $10, What is the amount of revenue realized from the sale

What level of taxes is needed to achieve an income : What level of taxes is needed to achieve an income of 2,400? (Assume government purchases remain at 400.)

What is the division residual income : Iba Industries is a division of a major corportation. The following data are for the latest year of operations:

What is the amount of cash dividends to be paid : The charter of a corporation provides for the issuance of 100,000 shares of common stock. What is the amount of cash dividends to be paid

What was the forecast error : Assume last period’s forecast was 36 and the demand was 38. What was the forecast error?

Estimate that should be used in developing : The controller wants your advice on the estimate that should be used in developing next year's budget.

User Account

All Pages