1. The economy begins at full GDP and the T2 tax rate.

2. Soon the economy dips into recession at GDP 400.

3. To stimulate the economy, the tax rate is reduced to T1.

4. The economy surges to 900.

5. To pay-off past debts, the tax rate is raised to T3.

GDP * rate = T -G = balance = T@full - G = structural + T - T@full =cyclical

1. 600 .12 72 -72 = 0 = 72 - 72 = 0 + 72 - 72 = 0

2. 400 .12 __ -72 = ___ = ___ - 72 = ____ + ___ - ___ = ___

3. 400 ___ __ -72 = ___ = ___ - 72 = ____ + ___ - ___ = ___

4. 900 __ __ -72 = ___ = ___ - 72 = ____ + ___ - ___ = ___

5. 900 __ __ -72 = ___ = ___ - 72 = ____ + ___ - ___ = ___

answers: -40 -24 -24 -24 -24 -16 0 0 .08 .08 .18 24 32 32 36 48 48 48 48 48 48 54 72 72 72 72 90 108 108 162 162

public $ 162 T3 108 T2 G 72 T1 48 32 full GDP 400 600 900Name ch.12a 3.3@ 1. The economy begins at full GDP and the T2 tax rate. 2. Soon the economy dips into recession at GDP 400. 3. To stimulate the economy, the tax rate is reduced to T1. 4. The economy surges to 900. 5. To pay-off past debts, the tax rate is raised to T3. GDP * rate =T -G = balance= T@fu||- G = structural+ T - T@full=cyclical 1. 600 .12 72 -72 = D = 72 - 72 = 0 + 72 - 72 = 0 2.400 .12 _ -72 _ = _ - 72 = _ + _ - _ = _ 3.400 _ _ 72 = _ = _ 72 = _ + _ - _ = _ 4.900 _ _ -72 = _ = _ - 72 = _ + _ - _ = _ 5.900 _ -72 = = - 72 = + - = answers: -40 -24 -24 -24 -24 16 O 0 .08 .08 .18 24 32 32 36 48 48 48 48 48 48 54 72 72 72 72 90 108 108 162 162