Question
Below is presidential candidates' proposals and their discussions. Candidate BJ proposed an increase tax by $200 billion. According to his plan, what will happen to
Below is presidential candidates' proposals and their discussions. Candidate BJ proposed an increase tax by $200 billion. According to his plan, what will happen to private savings, public savings, national savings and investment spending, namely by how much would they change? (Private Savings Public Savings National Savings Investment (table))
Spending Use Neoclassical Model, developed in Chapter 3. It is assumed that consumption function is c = 500 + 0.7 (Y - T). Everything else is assumed to be constant. Show your calculation. (b) TD argues that his proposal would improve economy. He proposes both a decrease tax by $200 billion and a decrease government spending by $200 billion at the same time. This is from one of his TV interviews; "The combination of tax cut and government spending cut will increase the level of investment in the economy. It's not what I just believe, it is what economists are saying." Is his argument correct? If so, how much would investment increase? Explain if his argument is correct or not. And show your calculation. Use Neoclassical Model, developed in Module 1. (Chapter 3 from ebook). It is assumed that consumption function is c = 500 + 0.7 (Y - T). Everything else is assumed to be constant.
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