Get premium membership and access questions with answers, video lessons as well as revision papers.
Increase in equilibrium income due to an increase in government expenditure in a closed economy is given by
?Y/?G = ?G/ (1 – ß)
The fall in equilibrium income due to an increase in lump sum taxation to meet revenue needs of increase in government expenditure is
?Y/?T = - ß?T / (1 – ß)
If taxes and government spending change simultaneously the combined effect on income is given by
?Y/?G = ?G/ (1 – ß) - ß?T / (1 – ß)
If the government maintains a balanced budget it means
?G = ?T
?Y/?G = ?G/ (1 – ß) - ?G / (1 – ß)
(1-ß) / (1-ß) ?G = ?G
Therefore the balanced budget multiplier is 1
Dana05 answered the question on July 18, 2019 at 20:00
- Derive the tax multiplier(Solved)
Derive the tax multiplier
Date posted: July 18, 2019. Answers (1)
- Derive the multiplier with government spending (Solved)
Derive the multiplier with government spending
Date posted: July 18, 2019. Answers (1)
- Derive the multiplier for investment (Solved)
Derive the multiplier for investment
Date posted: July 18, 2019. Answers (1)
- Derive the multiplier for induced investment (Solved)
Derive the multiplier for induced investment
Date posted: July 18, 2019. Answers (1)
- What factors cause a shift in the IS curve(Solved)
What factors cause a shift in the IS curve
Date posted: July 18, 2019. Answers (1)
- derive of the IS equation using the expenditure approach and assuming the absence of government. (Solved)
Derive the IS equation using the expenditure approach and assuming the absence of government.
Date posted: July 18, 2019. Answers (1)
- Describe the life cycle income hypothesis of consumption (Solved)
Describe the life cycle income hypothesis of consumption
Date posted: July 18, 2019. Answers (1)
- Describe the permanent income hypothesis of consumption (Solved)
Describe the permanent income hypothesis of consumption
Date posted: July 18, 2019. Answers (1)
- Describe the investment demand theory (Solved)
Describe the investment demand theory
Date posted: July 18, 2019. Answers (1)
- What factors determine consumption (Solved)
What factors determine consumption
Date posted: July 18, 2019. Answers (1)
- Describe the ratchet effect (Solved)
Describe the ratchet effect
Date posted: July 18, 2019. Answers (1)
- Describe the absolute income hypothesis of consumption (Solved)
Describe the absolute income hypothesis of consumption
Date posted: July 18, 2019. Answers (1)
- Differentiate between the average and the marginal propensity to consume
(Solved)
Differentiate between the average and the marginal propensity to consume
Date posted: July 18, 2019. Answers (1)
- What are the uses of national income accounting (Solved)
What are the uses of national income accounting
Date posted: July 18, 2019. Answers (1)
- Highlight the factors that determine the size of an economy’s National Income (Solved)
Highlight the factors that determine the size of an economy’s National Income
Date posted: July 18, 2019. Answers (1)
- What are the difficulties involved in the measuring of National Income (Solved)
What are the difficulties involved in the measuring of National Income
Date posted: July 18, 2019. Answers (1)
- Define the following terms
Gross Domestic Product
Gross National Product
National Income
Personal Income
Disposable Income (Solved)
Define the following terms
Gross Domestic Product
Gross National Product
National Income
Personal Income
Disposable Income
Date posted: July 18, 2019. Answers (1)
- Identify the approaches to the measurement of national income (Solved)
Identify the approaches to the measurement of national income
Date posted: July 18, 2019. Answers (1)
- Distinguish between leakages and injections in the economy giving examples (Solved)
Distinguish between leakages and injections in the economy giving examples
Date posted: July 18, 2019. Answers (1)
- What are the limitations of macroeconomics (Solved)
What are the limitations of macroeconomics
Date posted: July 18, 2019. Answers (1)