ECO100Y1 Lecture Notes - Retained Earnings, Nec, Fiscal Multiplier

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18 Apr 2011
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gov sector: relationship btw gov spending and y(gdp) depends on politics of party in power gov spending defined as autonomous": g = g, but gov also implies taxation and transfer payments. net tax fn (t) = taxes transfer payments: since taxes and transfer payments both autonomous and a fn of y. net taxes (t) = t 0 + ty t = net tax rate = t/ y > 0 because increase gdp increases taxes and decreases transfer payments. not significantly related to domestic y but foreign y: x = x, imports. macromodel (as a fn of y: equations are: c = a + byd (consumption fn) I = i 0 + iy (investment fn) t = t 0 + ty (net tax fn) yd = y - t (disposable income defn. ) ae = c + i + g + x i m (ae defn. )

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