Answer to Question #94574 in Macroeconomics for Danena Wu

Question

SECTION II (20 marks): Answer all parts of the question. When you answer using a diagram,
explain and label the axes carefully. Answers must be given in the space provided below each
question. Please show all working for each part of the question.
An economy is described by the following equations:

C = 500 + 0.85(Y – T), C is consumption, Y is income and T is taxation
M=0.05Y Imports
I
P = 1500, planned investment
G = 400, government spending
T = tY, t = 0.2 is the marginal tax rate and exogenous taxes,

Answer 1

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