Question
All information needed is in the question. Please help me answer and use diagrams where necessary. Thakns :) Question 1: Assume that there is a
All information needed is in the question. Please help me answer and use diagrams where necessary. Thakns :)
Question 1:
Assume that there is a country called Birchland, where the president is Dr Mooda.
a)Using the Keynesian model, illustrate and explain the situation when the economy of Birchland has the natural rate of unemployment equal to the actual rate of unemployment.(1 mark)
b)If Dr Mooda suddenly increases spending in Birchland's economy, using a newdiagram and the Keynesian model, illustrate and explain the impact of the increase in spending.(1 mark)
c)Using a new diagram and the Keynesian model, illustrate and explain how Dr Mooda could restore the economy back to where the natural rate of unemployment is equal to the actual rate of unemployment, by using a change in transfer payments.(2 marks)
d)What is another option for Dr Mooda to bring the economy back to equilibrium?(1 mark)
e)Assume that Birchland has a progressive income tax system. Explain the concept of such a system.(2 marks)
f)What is one of the main benefits of such an income tax system?(1 mark)
g)If Birchland has high inflation, explain how a progressive income tax system may be problematic for some workers.(2 marks)
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