Answer to Question #326207 in Macroeconomics for GIGIG

Question

Consider a closed economy for which the following initial data are known: c = 0.7, t = 0.15; the initial level of GDP is 3400 bil. $, the private consumption is 2000 bil. $, G = 500 bil. $, I = 900 bil. $ and autonomous taxes, transfers and subsidies are 0.

1. a) Determine the effect of an increase in the level of investments by 10 bil. $ on GDP (∆Y), budget deficit (∆BD), taxes (∆T) and private consumption (∆C).
2. b) Determine the effect of an increase of 5 p.p. (percentage points) in tax rate on the GDP and the budget deficit. 

Answer 1

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