Questions 1–16 For A Given Nation, Suppose The Following Tab

Questions 1 16for A Given Nation Suppose The Following Table Shows T

QUESTIONS 1-16: For a given nation, suppose the following table shows the relationship between real consumption and real disposable income (real GDP): Real Consumption ($) Real Disposable Income=Real GDP($) . 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? 2. What is the value of the marginal propensity to consume? 3. What is the value of the marginal propensity to save? 4. Compute the value of the Keynesian spending multiplier on goods and services. 5. 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. 6. 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. 7. 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. 8. 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? 9. Compute the value of the Keynesian tax multiplier. 10. Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in lump-sum taxes. 11. Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in lump-sum taxes. 12. 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. 13. 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. 14. Compute the value of the Keynesian spending multiplier for transfer payments. 15. Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in unemployment compensation. 16. Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in Social Security payments. 17. 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? 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% 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 24. $5,000 25. $50,000 26. $500,000 27. 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. 32. What is a Phillips Curve? What two rates are being related? 33. 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? 34. What are the characteristics of the long-run Phillips Curve? How is this curve related to the natural rate of unemployment? 35. 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 44. inflation rate = 4% and unemployment rate = 5% 45. inflation rate = 1% and unemployment rate = 9%

Paper For Above instruction

The set of questions provided covers a broad spectrum of macroeconomic concepts, emphasizing aggregate expenditures, fiscal policy impacts, taxation structures, unemployment dynamics, monetary policy, and the Phillips Curve relationship. This comprehensive examination requires a deep understanding of economic theory, the ability to perform quantitative calculations, and the capacity to interpret real-world economic shocks and policy responses.

Starting with the initial questions related to aggregate expenditures and equilibrium real GDP, it is essential to understand the components that define national income accounting. Aggregate expenditures (AE) are composed of consumption (C), investment (I), government spending (G), and net exports (NX). Given autonomous components, one can construct the AE function and equate it to real GDP (Y) to find the equilibrium. The formula is AE = C + I + G + NX, where consumption is often modeled as C = a + MPC * Y, with 'a' being autonomous consumption and MPC the marginal propensity to consume. Using the data provided, the equilibrium income is found where AE = Y. Calculations of MPC, marginal propensity to save (MPS), and the Keynesian multiplier follow from the slopes and intercepts of the consumption function.

The multipliers quantify economic responsiveness to autonomous spending changes. The Keynesian spending multiplier for goods and services is calculated as 1/(1 - MPC). When autonomous expenditures change, the resulting change in equilibrium GDP is determined by multiplying the autonomous change by this multiplier. Similarly, fiscal policy impacts, such as government spending additions, taxes, and transfer payments, are analyzed via their respective multipliers, which depend on MPC and the marginal tax rate.

Tax multipliers are crucial in understanding fiscal policy's effectiveness. The Keynesian tax multiplier, for example, measures the GDP response to changes in taxes, typically smaller than the spending multiplier due to the leakages through taxation. When taxes increase or decrease, the effect on GDP varies proportionally, impacted by the tax multiplier. Additionally, combined policies—simultaneous changes in spending and taxes—are analyzed to determine their net effect on GDP.

The questions also delve into fiscal policy's nature—expansionary, contractionary, or neutral—based on specific policy actions like tax surcharges aimed at funding military engagements, such as the Vietnam War. This particular surcharge would be classified as contractionary since it reduces disposable income and overall demand.

The subsequent questions explore the progressive, regressive, and proportional tax structures, which are distinguished by how tax rates and liabilities change relative to income levels. Progressive taxes increase proportionally with income, regressive taxes burden lower-income earners more, and proportional taxes levied at a flat rate regardless of income. Calculations involve applying tax brackets to specific incomes, then evaluating the average tax rate (ATR).

The Phillips Curve section addresses the inverse relationship between inflation and unemployment, highlighting how supply shocks, such as the oil crises during the 1970s, shifted the Phillips Curve, leading to stagflation—high inflation and unemployment occurring simultaneously. In the long run, the Phillips Curve becomes vertical at the natural rate of unemployment, reflecting no trade-off between inflation and unemployment.

Regarding the velocity of money, it is calculated as V = (Nominal GDP) / (Money Supply), illustrating how many times money circulates within the economy per period. This measure provides insight into the fluidity of transactions and the role of monetary policy.

Finally, the application of the Taylor Rule, with parameters from Rudebusch’s model, helps determine the appropriate federal funds rate target based on deviations of inflation from target and unemployment from natural levels. For example, with specified inflation and unemployment rates, the rule guides monetary policy adjustments crucial for stabilizing the economy.

Overall, these questions integrate theoretical frameworks with computational exercises, illustrating core macroeconomic principles and their practical policy implications. A nuanced understanding of these topics enables analysts to interpret policy decisions' macroeconomic impacts, especially during periods of economic instability or transition.

References

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