Answer to Question #147868 in Macroeconomics for Harry

Question

C = 450 + 0.4Y
I = 350

G = 150
X = 70
Z = 35 + 0.1Y
T = 0.15Y
Yf = 1550




Q.2.5 Calculate what the new equilibrium income should be if the government of this
country decides to cancel all taxes, implying the tax rate would now be 0%.

Answer 1

In equilibrium Y=Z

Y=C+I+G+X

Y=450+0.4Y+350+150+70

0.6Y=1020

Y=1700