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   6. Suppose that the following information is given (Yd is disposable income): C= 100 + (.75)(Y-T) G=...

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Economics

  

6. Suppose that the following information is given (Yd isdisposable income):

C= 100 + (.75)(Y-T) G= 250

I= 150 t= 20% M= .15Yd

a) What would be the effect on output of a $50 increase ingovernment spending? Show your work.

b) What if the marginal propensity to import was to increase.What would be the effect on output? Describe why it would affecteconomic activity.

c) What would be the effect on the equilibrium level of outputif the tax rate were to increase? Explain and draw a graph of thegoods market.

Answer & Explanation Solved by verified expert
3.6 Ratings (309 Votes)
ANSWERGIVEN THATTHE FOLLOWING INFORMATIONYCIGY 10075YT150250 10075Y2Y400 10006Y400 50006YY06Y500Y50004 1250A1 After an increase in government spending by 50 theoutput will rise by 125 YCIG50 10075YT15025050 10075Y2Y450    See Answer
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