Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. PRICE LEVEL 130 20 120 110 100 90 80 Aggregate Demand 70 + + 0 10 20 30 OUTPUT 40 50 60 Aggregate Demand ? Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy Y is 0.85 and the MPC in economy Z is 0.8. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the

Fiscal policy: Fiscal policy refers to the use of government spending and taxation to influence the economy. In the case of a severe negative supply shock, the government may increase spending to stimulate demand and offset the reduction in supply. For example, the government may invest in infrastructure projects to create jobs and boost economic growth. However, this may lead to an increase in government borrowing and higher interest rates, which can offset the benefits of the fiscal stimulus. show this graphically please.

Consider the following economy:   C = 300 + 0.8 (Y – T) I = $300                                               G = $200 and T = $250   What is the equilibrium level of national income? What is the change in national income, if only government spending increases by $10?  What is the government spending multiplier? What is the change in national income, if only taxes increase by $10? What is the tax       multiplier? Based on (b) and (c), does the balanced budget multiplier theorem hold? What is the change in national income, if both government spending and taxes increase by $10 each?

An economy is described by the following equations: C = 500 + 0.85(Y – T), Cis consumption, Y is income and T is taxation M=0.05(1-t)Y imports IP = 1500, planned investment G = 400, government spending T = tY, t = 0.2 is the marginal tax rate X = 1200, X is exports I. The equilibrium level of output for the above economy is 22500 Do NOT include any letters, spaces or symbols (e.g. "$" or ",") in your answer. II. The multiplier for this economy is equal to 6.67 (Round to 2 decimal places) III. Suppose that, in this economy, there is an exogenous decrease in spending of 180. This economy will now be experiencing expansionary gap. Possible answers (write ONE of the following only): "a contractionary" OR "an expansionary". IV. If the potential output of the economy is 10,000, the size of the output gap arising from part III will be Do NOT include any letters, spaces or symbols (e.g. "$" or ",") in your answer. V. If the Okun's Law beta parameter is 2, the cyclical unemployment rate…

The graph below shows the Laffer Curve, Using the point drawing tool, identify a tax rate/tax revenue combination such that tax rates can be reduced without reducing tax revenues. Label your new point 'T,' Carefully follow the instructions above, and only draw the required object. Tax Rate Tax Revenues

9. Ch.16: Graph the Laffer Curve. Suppose a nation collects taxes as a percent of income. The point on the graph below indicates the current tax rate on the horizontal axis, which runs from 0% on the left to 100% on the right. The vertical axis gives the government's tax revenue. Draw the nation's Laffer curve. i. ii. Suppose we are at the dot shown on the graph. Could we increase the tax rate and generate additional government revenue Tax revenue Rmax Tax rate (percent of income)

Changes in taxes The following graph plots an aggregate demand curve.   Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy.   Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy B is 0.7 and the MPC in economy A is 0.85. The economies are otherwise completely identical.   The tax cut will have a larger impact on aggregate demand in the economy with the (SMALLER MPC or LARGER MPC).

QUESTION 18 Answer questions 17 and 18 based on the following information: As you know, Flabovia has adopted a Value Added Tax (VAT); the tax rate across the board is 15%. A farmer grows vegetables and sells them to the wholesaler for $1/lb. The wholesaler sells them to the local market for $3/lb. The market then sells them to its customers for $10/lb. Question 18. What is the net tax paid by the wholesaler? O a. $0.15 O b. $0.45 c. $1.15 d. $0.30 O e. None of the Above QUESTION 19 For most companies, Tax Havens offer the benefits/advantages of_ O a. More sales and lower costs of production O b. Easier access to their markets and less regulation O c. Lower taxes and more regulation Od. Less regulation and lower taxes O e. Larger markets and less regulation and

The following table provides some information on government spending (G) and tax revenues (T) at different levels of real GDP in a hypothetical economy. Note: Throughout this problem you can assume, for simplicity, that government transfers are zero. Real GDP (Billions of dollars) 460 GOVERNMENT SPENDING AND TAXES (Billions of dollars) 80 78 76 74 Use the blue line (circle symbols) to plot the government spending schedule presented in the table. Then use the orange line (square symbols) to plot the economy's tax revenues schedule. 72 70 68 → 68 64 62 + 60 500 540 400 420 Government Spending (G) (Billions of dollars) 72 440 72 72 460 480 500 520 540 REAL GDP (Billions of dollars) 560 Tax Revenues (T) (Billions of dollars) 70 580 72 74 600 404-8141 Deficits Surpluses ?

Imagine this economy has a 10% tax on income. The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 Now we have to take that tax into account.  Here is a way to think about it: Look at the consumption function.  It says if you give me one more dollar of income I will spend 80 cents of it (mpc = 0.8).  BUT I can only spend what I receive.  I can only spend my after-tax or disposable income.  With a 10% tax, I don't receive Y I receive 90% of Y or Y*(1-t) where t = 10% or 0.1.   Let's define disposable income as Yd where Yd = Y*(1-t).   Therefore we restate our consumption function as C = k + cYd   Now we have, in this case, C = k + cYd or C = 3 + 0.8Yd or C = 3 + 0.8*(Y*[1-0.1]) or C = 3 + 0.72Y. Now what is the equilibrium GDP? Give the answer to ONE decimal place.