Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume the following data for the Australian economy (in billion $) then answer the questions that follow.Assume I, G and NX are independent of the

Assume the following data for the Australian economy (in billion $) then answer the questions that follow.Assume I, G and NX are independent of the level of income:

C = 150 + 0.6Y

I = 250

G = 350

NX = +50

Required:

(i)Calculate the marginal propensity to consume and calculate the value of the expenditure multiplier.

(ii)At what value of Real GDP does equilibrium exist?

(iii)Assume Potential RGDP = $2,200 billion.Does this economy have an inflationary or recessionary gap?What is the value of this gap?

(iv)By how much will the government need to change Government spending and in what direction, so that equilibrium RGDP equals Potential RGDP?

(v)If the government decided to change income tax, by how much will the Government need to change taxation and in what direction?

(vi)Are your answers to parts (iv) and (v) the same?Briefly explain why or why not.

(vii) What is the economic objective of this type of fiscal policy in regard to the level and type of unemployment?Briefly explain your answer

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Intelligence

Authors: Jerzy Surma

1st Edition

1606491857, 9781606491850

More Books

Students also viewed these Economics questions

Question

what is a variable cost

Answered: 1 week ago