Macroeconomics Answers

3- In 2006, Evo Morales assumed the presidency in Bolivia, a South American country in which official commerce is done in Spanish. Morales was the first Bolivian president of indigenous descent. As president, he quickly instituted reforms that were designed to reduce discrimination against indigenous populations with the aim of eventually reducing inequality. Suppose discrimination before Morales took two forms–discrimination in education by not providing state funds to educate all children (and particularly not educating indigenous children in Spanish), and discrimination in the job market by firms not willing to hire indigenous workers. a) In terms of education, which policy would be better at combating discrimination and inequality: b) In terms of the job market, which policy would be best at combating discrimination and inequality: (1) increasing the minimum wage, (2) requiring all firms with at least 50 workers to hire some indigenous workers,

You are given data on the following variables in an economy:

Government spending = 300

Planned investment = 200

Net exports = 50

Autonomous taxes = 250

Income tax rate = 0.1

Marginal propensity to consume = 0.5

A. Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonomous consumption.

B. Solve for the equilibrium level of output in the following two scenarios:

I. There is an income tax = 0.1

ii. There is no income tax in the economy. Denote these two variables by Y*w and Y*wo, respectively

C. In the economy with an income tax of 10% what is the budget balance of the government?

D. Solve for the change in net exports that would bring the equilibrium output level in the economy with the income tax to the level of Y*wo that you found in part B. Specity both the magnitude of the change and whether it is an increase or a decrease. What wlike be the new level of net exports after this change?