For a given nation, suppose the following table shows the relationship between real consumption and real disposable income (real GDP):
Real Consumption ($) | Real Disposable Income=Real GDP($) |
---|---|
120 | 100 |
200 | 200 |
280 | 300 |
360 | 400 |
440 | 500 |
520 | 600 |
- Assume autonomous real investment is $30, autonomous real government spending is $30, and autonomous real net exports is -$20. Compute Aggregate Expenditures at each level of real GDP. What is the value of equilibrium real GDP?
- What is the value of the marginal propensity to consume?
- What is the value of the marginal propensity to save?
- Compute the value of the Keynesian spending multiplier on goods and services.
- Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods and services by households.
- Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods and services by the federal government.
- Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in spending on goods and services by state governments.
- Suppose the equilibrium level of Real GDP decreases by $20. What was the amount of the change in autonomous expenditures which caused this to happen?
- Compute the value of the Keynesian tax multiplier.
- Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in lump-sum taxes.
- Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in lump-sum taxes.
- Suppose spending on goods and services is increased by $6 and lump-sum taxes are increased by $6. Give the amount of the change in the equilibrium level of Real GDP.
- Suppose spending on goods and services is decreased by $3 and lump-sum taxes are decreased by $3. Give the amount of the change in the equilibrium level of Real GDP.
- Compute the value of the Keynesian spending multiplier for transfer payments.
- Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in unemployment compensation.
- Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in Social Security payments.
- The federal government passed a one-time tax surcharge to increase tax revenues in 1968 to help pay for the Vietnam War. Was this expansionary fiscal policy, contractionary fiscal policy, or neutral?
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Questions 24-27:Given the following hypothetical U.S. Federal income tax brackets and marginal tax rates for single persons for 2011:
Taxable Income |
Marginal Tax Rates |
0 – $20,000 |
5% |
$20,000 – 60,000 |
10% |
$60,000 – 200,000 |
20% |
Over $200,000 |
30% |
compute the total tax due AND the average tax rate (ATR) for a single person with taxable income in 2011 (show your calculations!) of
- $5,000
- $50,000
- $500,000
- Which tax structure is this, based on your values of ATR?
Questions 28-30:For each of the following tax liability schedules, identify whether it represents a progressive, regressive, or proportional tax structure:
Taxable Income |
Tax Liability #28 |
Tax Liability #29 |
Tax Liability #30 |
$1,000 |
$100 |
$50 |
$100 |
$2,000 |
$100 |
$100 |
$300 |
$3,000 |
$100 |
$150 |
$500 |
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- What is a Phillips Curve? What two rates are being related?
- What were the aggregate supply shocks to the American economy during the 1970s and early 1980s? How did these shocks affect interpretation of the Phillips Curve?
- What are the characteristics of the long-run Phillips Curve? How is this curve related to the natural rate of unemployment?
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- Calculate the value of the velocity of money assuming nominal national income is $50,000 and the money supply is $10,000. Explain what this value of velocity which you computed means.
Questions 44-45: Using the Rudebusch version of the Taylor rule from the internet activity, compute the value of the Federal Reserve’s target for the federal funds rate should be if
- inflation rate = 4% and unemployment rate = 5%
- inflation rate = 1% and unemployment rate = 9%