Consider the following table showing national income and government net tax revenues in billions of dollars. Assume

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Consider the following table showing national income and government net tax revenues in billions of dollars. Assume that the level of government purchases is \(\$ 155 \) billion.

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a. Compute the government's budget balance for each level of national income and fill in the table.

b. Suppose that net taxes are given by \(T\), where \(T=\) \(t_{0}+t_{1} Y\). Using the data in the table, determine the values of \(t_{0}\) and \(t_{1}\).

c. What is the interpretation of \(t_{0}\) ?

d. What is the interpretation of \(t_{1}\) ?

e. Suppose the government decides to increase the level of its purchases of goods and services by \(\$ 15 \) billion. What happens to the budget balance for any level of national income?

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Macroeconomics

ISBN: 9780133910445

15th Edition

Authors: Christopher T S Ragan

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