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with the following information answer the questions c 1060 0 8 yd 1 2000 g 800 x 2000 m 300 0 7 y t 0 3 c find the equilib

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With the following information, answer the questions: C =1060 + 0.8 Yd 1 = 2000 G =800 X = 2000 M = 300 ÷ 0.7 Y t=0.3 c. Find the equilibrium income d. If the state decides to increase taxes by 40%. Indicate what happens with the equilibrium income.

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Answer to a math question With the following information, answer the questions: C =1060 + 0.8 Yd 1 = 2000 G =800 X = 2000 M = 300 ÷ 0.7 Y t=0.3 c. Find the equilibrium income d. If the state decides to increase taxes by 40%. Indicate what happens with the equilibrium income.

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83 Answers

Y = C + I + G + (X - M)

Given:

C = 1060 + 0.8Y_d

I = 2000

G = 800

X = 2000

M = 300 + 0.7Y

t = 0.3

c. Find equilibrium income:

Net taxes =

tY

Disposable income =

Y - tY = Y (1 - 0.3) = 0.7Y

So,

C = 1060 + 0.8 \cdot 0.7Y = 1060 + 0.56Y

Equilibrium condition:

Y = C + I + G + (X - M)

Y = 1060 + 0.56Y + 2000 + 800 + 2000 - (300 + 0.7Y)

Y = 1060 + 2000 + 800 + 2000 - 300 + 0.56Y - 0.7Y

Y = 5560 - 0.14Y

Y + 0.14Y = 5560

1.14Y = 5560

Y = \frac{5560}{1.14}

Y = 4877.19298

Rounded:

Y_e=4877

d. If the state decides to increase taxes by 40%:

t \text{ (new) } = 0.3 \cdot 1.4 = 0.42

New disposable income:

Y_d = Y - tY = Y(1 - 0.42) = 0.58Y

C = 1060 + 0.8 \cdot 0.58Y = 1060 + 0.464Y

New equilibrium condition:

Y = 1060 + 0.464Y + 2000 + 800 + 2000 - (300 + 0.7Y)

Y = 1060 + 2000 + 800 + 2000 - 300 + 0.464Y - 0.7Y

Y = 5560 - 0.236Y

Y + 0.236Y = 5560

1.236Y = 5560

Y = \frac{5560}{1.236}

Y \approx 4499.3

Rounded:

Y_e=4499

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