MGEA06H3 Lecture Notes - Lecture 4: Exchange Rate, Kolmogorov Space, Xm Satellite Radio

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raspberryplatypus436

30 Apr 2011

School

UTSC

Department

Economics for Management Studies

Course

MGEA06H3

Professor

Iris Au

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MGEA06H3 Full Course Notes

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Enriching the model including government and foreign sector. The government enters the model in the following ways: collecting taxes, t, the government collects taxes from households and firms to finance its spending, assumption: Taxes are positively related to income: tax function: T = t0 + t1y, where t0 = autonomous taxes t1 = tax rate & 1 > t1 > 0. www. notesolution. com. Transfer payments are inversely related to income: transfer payments function: Tr = tr0 tr1y, where tr0 = autonomous transfer tr1 = benefit reduction rate & 1 > tr1 > 0: spending on final goods and services, g, it is also called government purchases, and it is the government expenditure on final goods and services, assumption: G is an autonomous variable, (i. e. , its value is given), i. e. , The foreign sector: when an economy trades with foreign countries, this economy is an open economy.

Related Questions

Which of the following statements regarding aggregate expenditure and aggregate demand is correct?

A. Aggregate demand shows the amount of the desired spending from given levels of income, while aggregate expenditure shows the amount of the desired spending from given levels of prices.

B. Aggregate expenditure shows the amount of the desired spending from given levels of income, while aggregate demand shows the amount of the desired spending from given levels of prices.

C. Aggregate expenditure and aggregate demand represent the same concepts.

D. Aggregate expenditure only includes government purchases and consumption, while aggregate demand includes government purchases, consumption, and investment.

greygnu641

In the economic of Zip, the marginal propensity to consume is 0.8. Government expenditures on goods and services are 50 billion, and taxes are 60 billion. Zip has no exports and no imports.

1. the government increases its expenditures on goods and servicesto 60 billion. calculate the final change in aggregate demand as aresult of this increase in government expenditures.

2. the government increases taxes to 70 billion. calculate thefinal chage in aggregate demand as a result of this increase intaxes.

3. the government simultaneously increases both its expenditures on goods and services and taxes by 10 billion. what is the net change in aggregate demand? why does aggregate demand increase?