Chapter 9: The Government and the Fiscal Policy

Bill's income is ____ and his net taxes are ____. His disposable income is

Y - T

In 2016, the city of Canfield collected ____ in taxes and spent ____. In 2016, the city of Canfield had a

T - G

After government and taxes are added to the income-expenditure model, the formula for the aggregate consumption function is

C = a + b(Y - T)

C = __+ __Yd , G =_, T =_, I =_.The equilibrium level of output is

Equilibrium Condition

Y = C + I + G

The aggregate consumption function is C = __ + __Yd. If income is __ and net taxes are __, consumption equals

C = a + b(Y - T).

Refer to the US economy. The equilibrium level of output for the US economy is

Y = C + I + G

Refer to the US economy. At the equilibrium level of output in the US, consumption equals

C = a + b(Y - T)

Refer to the US economy. At the equilibrium level of output in the US, saving equals

S = Y - C - T

If the MPC is __, the government spending multiplier is

1 / 1 - MPC

If the MPC is __, the tax multiplier is

-MPC / (1 - MPC)

Taxes are reduced by __ , and income increases by __. The value of the tax multiplier is

ΔY = ΔT x tax multiplier

If the tax multiplier is __, then the government expenditure multiplier

-MPC / 1 - MPC

Assume that taxes depend on income. The MPC is __ and t is __. The government spending multiplier is

1 / (1 - MPC) + (t x MPC)

Assume that taxes depend on income. The MPC is __, and t is __. The tax multiplier is

-MPC / (1 - MPC) + (t x MPC)

Assume that taxes depend on income. The MPC is __, and t is __. If government spending increases by
__, the equilibrium level of output will increase by

ΔY = ΔGx 1 / (1 - MPC) + (t x MPC)

Assume that taxes depend on income. The MPC is __, and t is __. If tax increases by __, the
equilibrium level of output will decrease by

ΔY = ΔT x -MPC / (1 - MPC) + (t x MPC)