Suppose that the Danish Parliament passes a large tax increase and taxes now equals 400. The aggregate output of the Danish economy is characterized as follows.
Consumption: C = 100 + 0.5(Y-T)
Investment: I = 300
Government: G = 200
Taxes: T = 400
The tax multiplier for the Danish economy is -1 .
Hint: Don't forget to include the negative sign, if your answer is a negative number.
Answer Key: -1
Problem Set
- Suppose that the Danish Parliament passes a large tax increase and taxes now equals 400. The aggregate output of the Danish economy is characterized as follows. Consumption: C = 100 + 0.5(Y-T) Investment: I = 300 Government: G = 200 Taxes: T = 400 The new level of equilibrium output (Y) in Denmark is 800 .
- Suppose the aggregate output of the Danish economy is characterized as follows. Consumption: C = 100 + 0.5(Y-T) Investment: I = 300 Government: G = 200 Taxes: T = 200 Assume that Denmark is a closed economy, with no net exports. Given the information, the marginal propensity to consume (mpc) in Denmark is 0.5 .
- Suppose the aggregate output of the Danish economy is characterized as follows. Consumption: C = 100 + 0.5(Y-T) Investment: I = 300 Government: G = 200 Taxes: T = 200 Assume that Denmark is a closed economy, with no net exports. Given the information, national savings in Denmark is 300 .
- Suppose the aggregate output of the Danish economy is characterized as follows. Consumption: C = 100 + 0.5(Y-T) Investment: I = 300 Government: G = 200 Taxes: T = 200 Assume that Denmark is a closed economy, with no net exports. Given the information, the equilibrium level of consumption (C) in Denmark is 500 .
- Suppose the aggregate output of the Danish economy is characterized as follows. Consumption: C = 100 + 0.5(Y-T) Investment: I = 300 Government: G = 200 Taxes: T = 200 Assume that Denmark is a closed economy, with no net exports. Given the information, the equilibrium level of output in Denmark is 1000 .
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