Question
The establishment of macroeconomics as a specific field of study occurred following the Great Depression of the 1930s. The published work of John Maynard Keynes,
The establishment of macroeconomics as a specific field of study occurred following the Great Depression of the 1930s. The published work of John Maynard Keynes, The General Theory of Employment, Investment and Money, laid the foundation for macroeconomics. Consider the following Keynesian model for an economy: where = 250 mil + 0.84Yd = 175 mil = 310 mil T = 0,26Y Yf = 3 100 million Equilibrium income: Y = C + I + G Disposable income: Yd = (1 - t)Y NOTE: A proportional income tax reduces the disposable income of households and therefore also their consumption spending which forms part of aggregate spending in the economy. The introduction of a proportional income tax thus reduces aggregate spending,
Using two separate methods, calculate the equilibrium level of income without income tax. [Tip: You should obtain the same answer for both methods.] (5)
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