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Homework answers / question archive / i have calculated in previous sections and concluded by answers in 9) and 10) already

i have calculated in previous sections and concluded by answers in 9) and 10) already

Business

i have calculated in previous sections and concluded by answers in 9) and 10) already.Part (9)Assume that the government decides to change autonomous taxes in order to achieve equilibrium income. Will it need to raise, lower or leave unchanged autonomous taxes to achieve this? If autonomous taxes do need to change by how much do they need to be raised or lowered for the economy to be in equilibrium (solve to two decimal places).

Change in taxes is -4.29 billion

This implies that to achieve the equilibrium income level, government should decrease autonomous taxes by $4.29 billion.

Part (10)

What if instead of changing autonomous taxes the government decides to act directly to achieve a short run equilibrium? What would the government need to do precisely if it took a direct approach in its fiscal policy response.

Government spending is 3 billion

Government spending should increase by $3 billion. 

Part (11)

Compare the impacts of both scenarios from parts 9 and 10 on the balance of the government budget which prior to this had been in deficit by $10b. If you had to advise the government on adopting one of these approaches which one would you argue for. Explain why. In your answer consider factors aside from the impact on the budget that may be relevant to the macroeconomy. 

 

This is my working please check

change in T - change in G= - 10 b

change in G is -5.71 b

taxes should be increased by 5.71 billion

change in T - change in G= - 10 b

change in T is -7.00 b

Government Spending should decrease by 7 billion

Explanation..Government should use expansionary fiscal policies instead of tax cuts to achieve short-term equilibrium. The government could offer rebates for tax incentives to increase aggregate demand and boost economic growth. Thus, more resources to spend or invest as people pay lower taxes therefore higher demands. Demand leads businesses to recruit more, lower unemployment and increase labour competition. Therefore, helps to increase salaries and generate more money for savings and investment for customers. Decreasing government spending is the better option as cuts in spending are sometimes correlated with factors affecting economic activity. Decrease in government spending has a larger short-term impact than increase in tax. Spending cuts on social security and Medicare will be slowed without reducing the country's productive ability, though these changes should only be made if the vulnerable citizens are protected. Sectors such as education, research and infrastructure are one of the examples that help increase the future productivity, but the private sector is unlikely to step up if the government pulls back.

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