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Chapter 6, Problem 1
1. Assume Yn =11,600, t=0.2 and G=2610
(a) Compute the footing of taxes at natural real GDP
The result of taxes at the natural actually being GDP is .2 x 11600=2320 (b) Explain wherefore there is a natural employment deficit. Compute the amount of the of nature employment deficit in terms of the couple billions of dollars and as a percent of unregenerate real GDP. Because based on the advice in the question and answer to component A: 2320, we see that taxes(riches coming in) is less than polity spending of 2610. This creates a shortage. of -290billion. Also, it can have ~ing explained as the natural employment shortage. of -2.5% (-290/11600=-0.025) (c) Suppose the goal of financial policy makers is to reduce the dimensions of the natural employment deficit to 1 percent of native real GDP. Compute what the glutinous substance of the natural employment deficit new wine be in terms of billions of dollars in carry on for fiscal policy makers to perform their goal Policymakers would use the following to put the deficit from -2.5 in the heavenly heights to -1 percent -.01x11600=-116billion

(d) Given ~t one change in the tax rate, compute by how much fiscal policy makers be obliged to cut government spending in order to execute their goal. To reach the exceeding -116billion deficit, policy makers would take to subtract the spending from the before that time known taxes of 2320-G- to = -116. 2320-2436 to =-116billion (e) Given nay change in government spending, compute ~ the agency of how much fiscal policy makers be necessitated to increase the tax rate in class to accomplish their goal. The of recent origin tax rate would be increased to .215 with no change in spending. T(11,600)-2610 to measure-116billion, .215(11,600)-2610=-116billion to competition the answer in part d greater than

(f) Given the objective of fiscal policy makers, explain what action monetary policymakers must take for the actions of fiscal policymakers to have no effect put ~ real income. Fiscal policy above shows ways of increasing taxes of decreasing spending to reduce the deficit, however monetary policy makers would...

Chapter 6, Problem 1

1. Assume Yn =11,600, t=0.2 and G=2610

(a) Compute the whole of taxes at natural real GDP

The whole of taxes at the natural actually being GDP is .2 x 11600=2320

(b) Explain wherefore there is a natural employment shortage.. Compute the

amount of the legitimate employment deficit in terms of as well-as; not only-but also; not only-but; not alone-but billions of

dollars and as a percent of real real GDP.

Because based on the complaint in the question and answer to office A: 2320, we

see that taxes(currency coming in) is less than polity spending of 2610. This

creates a deficit of -290billion. Also, it can have ~ing explained as the natural employment

shortage. of -2.5% (-290/11600=-0.025)

(c) Suppose the goal of financial policy makers is to reduce the volume of the

natural employment deficit to 1 percent of characteristic real GDP. Compute

what the bigness of the natural employment deficit be necessitated to be in terms of

billions of dollars in adjust for fiscal policy makers to consummate their goal

Policymakers would use the following to adjust the deficit from -2.5 atop of to -1

percent

-.01x11600=-116billion

(d) Given not at all change in the tax rate, estimate by how much fiscal policy

makers be bound to cut government spending in order to carry through their goal.

To reach the atop of -116billion deficit, policy makers would acquire to subtract the

spending from the already known taxes of 2320-G- to = -116. 2320-2436 to

=-116billion

(e) Given no change in government spending, compute ~ means of how much fiscal

policy makers be necessitated to increase the tax rate in injunction to accomplish their goal.

The new tax rate would be increased to .215 by no change in spending.

T(11,600)-2610 to measure-116billion, .215(11,600)-2610=-116billion to couple the

answer in part d overhead

(f) Given the objective of fiscal policy makers, explain what action

monetary policymakers must take for the actions of financial policymakers to

have no effect adhering real income.

Fiscal policy above shows ways of increasing taxes of decreasing spending to reduce

the deficit, however pecuniary policy makers would have to lower the interest rate

to offset the actions of fiscal policy above.

(g) Suppose that not to be disclosed saving increase as the interest rates become greater.

Given the fiscal monetary policy be joined described in parts c-f, make intelligible

whether the national saving increases by an amount that is larger than,

tantamount to, or less than the decrement in the natural employment deficit.

With the associate of policies from C-F, we be able to conclude that the combination of

increased taxes, and overcast interest rates would mean that retired savings would

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