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Using the same simple macro model we developed in Module 2:
a. Show what will happen to national income (GDP) if the administration implements another $100 (billion) stimulus spending package.
b. Show what would happen if instead of a government spending package, the administration implemented a $100 tax cut.
c. From your results, find the numerical values of the derivatives dY/dG and dY/dT. (Hint: Numerically, dY is just the new value of Y less the old value and dG is the new value of government spending less the old one. Find the ratios of those numbers and you have found the value of the derivative.) Which policy has the largest effect and why?
The relationship between, total expenditure and price elasticity of demand has summed up in the below table: Table: Elasticity and Consumption Expenditure Elas
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Question 1: Either ‘Today the business organizations are quite different from the traditional classical firm with a wide range of objectives.' Discuss the above statement
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