Question
Answer the following short questions on fiscal policy. Calculate the effects of the following three scenarios of fiscal measures: (a) Calculate the impact on aggregate
Answer the following short questions on fiscal policy. Calculate the effects of the following three scenarios of fiscal measures:
(a) Calculate the impact on aggregate demand of an increase in government spending by 50 million euros if the (constant) tax rate is 30% and the marginal propensity to consume is 0.8.
b) Calculate the impact on aggregate demand of an increase in public spending by 50 million euros, simultaneously with a decrease in transfers by the same amount, in an environment with a tax rate of 30% and a marginal propensity to consume of 0.8 .
c) Calculate the impact on aggregate demand of an increase in government spending by 50 million euros, in a scenario in which taxes, T, are fixed (they do not depend on income, so that disposable income is Y-T) and increase by the same amount of 50, the marginal propensity to consume being 0.8.
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