Answer to Question #25091 in Macroeconomics for Esther D
For an economy with a tax rate of 10%, the following is given:
C = 60 + 0.8YD
G = 400
I = 140
NX = 10 - 0.20Y
(I) If the economy produces $1 of extra output, how much of it is;
(a). spent on domestic goods?
(b). import expenditure?
(a). Compute the multiplier.
(b). Calculate the equilibrium level of national income?
(c). What is the value of consumption expenditure in equilibrium?
(d). Assume all taxes are collected. Is the Government experiencing a budget deficit in equilibrium? Why?
(e). Is the economy experiencing a trade deficit? Why?
(f) If government increases its spending by 25%, what would be the equilibrium level of national income when all spending rounds are exhausted?
(g). Assume that these results referred to the economy your country. Briefly discuss the implications of each of the results for your country’s economy.