ECO100Y5 Lecture Notes - Lecture 11: Automatic Stabilizer, Business Cycle, Autonomous Consumption

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Net tax revenue: total tax revenue received by government total transfer payments made by the government. Net tax revenue are positive because transfer payment are smaller than total tax revenues. As national income rise, a tax system with given tax rates will yield more revenue t is the net tax rate (the increase in net tax revenue generated when national income increase by . Budget balance is total government revenue total government expenditure. Budget surplus: when net revenue exceed government purchases. Budget deficit: when net revenue is less than government purchases. Marginal propensity to import: the amount that desired imports rise when national income rise by . M is the marginal propensity to import. Shifts in the net export function: changes in foreign income. An increase in foreign income, will lead to an increase in the quantity of canadian goods demanded by foreign countries: changes in international relative prices.

Related Questions

I'm a bit confused about this question, help would be much appreciated.

The following macroeconomics equation describes an accounting identity (i.e. fact) relating national savings (S) to total investment (I), government spending (G), tax revenue (T), exports (X), and imports (M):

(S-I)= (G-T)+(X-M)

Assume a country has a net-zer trade balance (X-M=0)

A) Suppose a country experiences a government budget deficit, (G>T). What can we infer about the relationship between national savings (S) or investment (I)? Explain which is greater.

B) Now, suppose a country experiences a government budget surplus (G<T). Which is greater, national (S) or investment (I)? Explain.

carminedolphin386

On the planet Omicron Persei 8, government spending is $1000, net taxes are $1200, and planned investment is $1400. Consumers spend according to the equation C = 100 + 0.8Yd, where Yd represents disposable income. Given this information, fill out the table below to determine which of the output levels represents a macroeconomic equilibrium, then answer the questions that follow. Output (Income) Y Net Taxes T Disposable Income Yd Consumption C Planned Investment I Government Purchases G Planned Aggregate Expenditure AE Unplanned Inventory Change 6200 1200 5000 3850 1400 1000 6250 -50 6700 1200 5500 4225 1400 1000 6625 75 7200 1200 6000 4600 1400 1000 7000 200 7700 1200 6500 4975 1400 1000 7375 325 8200 1200 7000 5350 1400 1000 7750 450

An a. Which level of output is a macroeconomic equilibrium? There is no level of equilibrium based on inventory levels.

b. Is the government budget balanced, in deficit, or surplus, and by how much? Since the government is spending less than it is collecting in taxes, we are showing a surplus.

c. Find the marginal propensity to consume, and the marginal propensity to save. d. Find the government spending multiplier. If the government wanted to increase the equilibrium level of income by $1,000, how much would it have to increase government purchases? e. Find the tax multiplier. If net taxes were lowered by $100, what effect would it have on the equilibrium level of income? Give a specific numerical answer.

cerisewallaby167

5 Multiple choice questions... please answer all of them.

15.

The accumulation of years of spending more money than is collected in revenues over several years creates a budget (5 points)

	debt
	deficit
	surplus
	reversal

16.

How does the U.S. government promote economic growth? (5 points)

	By decreasing taxes and decreasing spending
	By decreasing taxes and increasing spending
	By increasing taxes and decreasing spending
	By increasing taxes and increasing spending

17.

The country of Lilliput has low unemployment and high consumer spending, and small businesses are thriving. However, prices are starting to rise throughout the economy. What should Lilliput's government do to prevent inflation from happening? (5 points)

	Lower the income tax, which gives citizens less money to spend, and buy services from civilian-owned businesses, which creates more jobs.
	Lower the income tax, which gives citizens more money to spend, and buy more services from civilian-owned businesses, which creates more jobs.
	Raise the income tax, which gives citizens less money to spend, and stop buying services from civilian-owned businesses, which eliminates jobs.
	Raise the income tax, which gives citizens less money to spend, and buy more services from civilian-owned businesses, which creates more jobs.

18.

The government increases taxes. What might be a reason for this change in fiscal policy? (5 points)

	A deficit due to improving nationwide public transportation
	A deficit due to more monies flowing in from investors
	A surplus due to greater amounts of income from exports
	A surplus due to more government spending on building roads

19.

Which of these is required to balance the budget for the year? (5 points)

	Revenue equal to spending
	Revenue greater than spending
	Revenue less than spending
	No national debt

ECO100Y5 Lecture Notes - Lecture 11: Automatic Stabilizer, Business Cycle, Autonomous Consumption

ECO100Y5 Full Course Notes

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