Question 6. 6. Given the basic Keynesian model-as a starting point:

Y = C + I + G
C = a + b Yd
I = f (i) I ? f (Y) ie., MPI* = 0
G = Go
Tx = Txo
* MPI to represent marginal propensity of invest (NOT import)
Assume that the current income level in the economy is $600 billion. To reduce the unemployment rate to the desired level, it is determined that we must raise the income level to $650 billion. Assume that C = 25 + 0.75 Yd . To accomplish this, taxes will have to be cut by how much? (Points : 3)

A. $50 billio

B. $40 billion

C. $16.7 billion

D. $12.5 billion

E. $150 billion

 

7. Given the basic Keynesian model-as a starting point:
Y = C + I + G
C = a + b Yd
I = f (i) I ? f (Y) ie., MPI* = 0
G = Go
Tx = Txo
* MPI to represent marginal propensity of invest (NOT import)
And if we write a tax function so that TX = To + t Y, where t is the tax rate, then the effect on the multipliers would be to:

A. increase the value (in absolute value, ignore signs)

B. decrease the value

C. have no effect on the value

 

8. Given the basic Keynesian model-as a starting point:
Y = C + I + G
C = a + b Yd
I = f (i) I ? f (Y) ie., MPI* = 0
G = Go
Tx = Txo
* MPI to represent marginal propensity of invest (NOT import)
Assume C = 20 + .8Yd, a $10 billion tax cut would shift the consumption function upward by:

A. $10 billion

B. more than $10 billion

C. less than $10 billion

D. cannot be determined

 

9. Given the model Y = C + I + G + X - M
C = a + bYd where Yd= Y -Tx
I = f ( i ...), MPI = 0
G, Tx, X, Ms are all exogenous variables
M = Mo + mY (import function)
Md = Mt + Ml (money demand)
Mt = f ( Y...)
Ml = f ( i...)
Now assume there is an increase in government spending. This will result in:

A. a rightward shift of the LM curve

B. an increase in consumption spending

C. no change in aggregate income

D. an increase in the level of exports

 

10. Assume a four spending sector model where the following variables are exogenously determined: Ms, Tx, G, X; assume also that investment spending and the asset/liquidity preference demand for money are both inversely related to interest rates; that consumption is positively related to disposable income and imports are also positively related to the level of domestic income. Now assume that the Federal Reserve goes on a major bond buying binge (in normal times and under normal conditions). This would result in:

A. a rightward shift of the IS curve

B. a leftward shift of the IS curve

C. a rightward shift (or rotation) of the LM curve

D. a leftward shift (or rotation) of the LM curve

SophiaPretty

(5)

Status NEW Posted 05 Sep 2017 08:09 AM My Price 10.00

 H-----------ell-----------o S-----------ir/-----------Mad-----------am ----------- -----------Tha-----------nk -----------You----------- fo-----------r u-----------sin-----------g o-----------ur -----------web-----------sit-----------e a-----------nd -----------acq-----------uis-----------iti-----------on -----------of -----------my -----------pos-----------ted----------- so-----------lut-----------ion-----------. P-----------lea-----------se -----------pin-----------g m-----------e o-----------n c-----------hat----------- I -----------am -----------onl-----------ine----------- or----------- in-----------box----------- me----------- a -----------mes-----------sag-----------e I----------- wi-----------ll

Not Rated(0)

• Buy Answer