08 Jun Question Economics 305 David D. Selover
Question
Economics 305 David D. Selover
Intermediate Macroeconomics Fall 2015
Homework # 4
The Multiplier
Given the simple model of Chapter 3 and some simple assumptions about the goods market, compute the multipliers requested below. Make the following assumptions:
The Total Demand for Goods:
The Goods Market Equilibrium:
Linear Consumption Function:
Disposable Income:
Exogenous Investment:
1) Given the above assumptions, graph the model of the goods market, and label the axes, the functions, and the equilibrium point and value of Y.
2) On the graph, show what would happen if government expenditures were increased due to expansionary fiscal policy.
3) Given the above assumptions compute the fiscal policy multiplier.
4) Given the above assumptions compute the tax multiplier on T.
5) Assume that there is a balanced budget and that G is held equal to T. Now compute the fiscal policy multiplier.
The Total Demand for Goods:
Linear Import Function:
Exogenous Exports:
6) Go back to the assumptions from (1), (2), and (3). Assume now that there is trade, with a marginal propensity to import of ‘m’. Now compute the fiscal policy multiplier.
7) Assume now that there is both trade and a proportional income tax such that T = tY. Now compute the fiscal policy multiplier.
8) Go back to the original model used in questions 1-3. Assume that I = $1300 billion, G = $1200 billion, T = $1100 billion, = 0.60, and = $1400 billion. What is the equilibrium value of GDP (Y)? What is the equilibrium value of consumption (C)? What is the numerical value of the fiscal policy multiplier?
9) Assume that = 0.90, = $1400, m = 0.10, and t = 0.15. Using the formulas for the multipliers that you calculated above, compute the numerical value for each fiscal policy multiplier – the original multiplier (3), the balanced budget multiplier (5), the multiplier with imports (6), and the multiplier with imports and proportional taxes (7).
10) Compare the four multipliers numerically, and explain why you think each multiplier is different.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.