2nd Year Macroeconomics Chapter 5

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12 Terms

1
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Income-Expenditure Identity

Y = C + G

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PPF (no distortion)

C = zF(K, Nd) - G

3
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Competitive Equilibrium (no distortion)

𝑀𝑅Sl,C = 𝑀𝑅𝑇l,C = 𝑀𝑃N = w

4
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Pareto Optimum (no distortion)

𝑀𝑅Sl,C = 𝑀𝑅𝑇l,C = 𝑀𝑃N = w

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PPF (distortion)

C = z(h – l) - G

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Conusmer's Budget Constraint (distortion)

C = z(1 - t)(h - l)

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Profit Formula (distortion)

 Π = (z - w)Nd

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Labour Demand Curve Distortion Assumption

w = z

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Competitive Equilibrium (distortion)

𝑀𝑅Sl,C = -w

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Pareto Optimum (distortion)

𝑀𝑅Sl,C = 𝑀𝑅𝑇l,C

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Government Revenue

REV = tz[h – l(t)]

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Tax Rate Formula

t = G/Y