Personal Finance Chapter 6 Essay
Chapter 6, Problem 1
1. Assume Yn =11,600, t=0.2 and G=2610
(a) Compute the amount of taxes at natural real GDP
The amount of taxes at the natural real GDP is .2 x 11600=2320
(b) Explain why there is a natural employment deficit. Compute the amount of the natural employment deficit in terms of both billions of dollars and as a percent of natural real GDP.
Because based on the information in the question and answer to part A: 2320, we see that taxes(money coming in) is less than government spending of 2610. This creates a deficit of -290billion. Also, it can be explained as the natural employment deficit of -2.5% (-290/11600=-0.025)
(c) Suppose the goal of fiscal policy makers is to reduce the size of the natural employment deficit …show more content…
To reach the above -116billion deficit, policy makers would have to subtract the spending from the already known taxes of 2320-G- to = -116. 2320-2436 to =-116billion
(e) Given no change in government spending, compute by how much fiscal policy makers must increase the tax rate in order to accomplish their goal.
The new tax rate would be increased to .215 with no change in spending. T(11,600)-2610 to equal-116billion, .215(11,600)-2610=-116billion to match the answer in part d …show more content…
(g) Suppose that private saving increase as the interest rates increase. Given the fiscal monetary policy mix described in parts c-f, explain whether the national saving increases by an amount that is larger than, equal to, or less than the decrease in the natural employment deficit.
With the mix of policies from C-F, we can conclude that the combination of increased taxes, and lowering interest rates would mean that private savings would be reduced but national savings would increase to a level less than the decrease in the natural employment deficit.
Chapter 7, Problem 3
3. Suppose that ex is the exchange rate between the US dollar and the Chinese yuan in that ex indicates the number of yuan that can be purchased with one dollar. The demand for dollars, denoted, D$, is given by the equation D$ = 2,800 - 200ex. The supply of dollars, denoted, S$, is given by the equation S$ = 400 + 100ex.
A. Calculate the demand for dollars and supply of dollars at exchange rates between 0 and 12 in increments of
1. Assume Yn =11,600, t=0.2 and G=2610
(a) Compute the amount of taxes at natural real GDP
The amount of taxes at the natural real GDP is .2 x 11600=2320
(b) Explain why there is a natural employment deficit. Compute the amount of the natural employment deficit in terms of both billions of dollars and as a percent of natural real GDP.
Because based on the information in the question and answer to part A: 2320, we see that taxes(money coming in) is less than government spending of 2610. This creates a deficit of -290billion. Also, it can be explained as the natural employment deficit of -2.5% (-290/11600=-0.025)
(c) Suppose the goal of fiscal policy makers is to reduce the size of the natural employment deficit …show more content…
To reach the above -116billion deficit, policy makers would have to subtract the spending from the already known taxes of 2320-G- to = -116. 2320-2436 to =-116billion
(e) Given no change in government spending, compute by how much fiscal policy makers must increase the tax rate in order to accomplish their goal.
The new tax rate would be increased to .215 with no change in spending. T(11,600)-2610 to equal-116billion, .215(11,600)-2610=-116billion to match the answer in part d …show more content…
(g) Suppose that private saving increase as the interest rates increase. Given the fiscal monetary policy mix described in parts c-f, explain whether the national saving increases by an amount that is larger than, equal to, or less than the decrease in the natural employment deficit.
With the mix of policies from C-F, we can conclude that the combination of increased taxes, and lowering interest rates would mean that private savings would be reduced but national savings would increase to a level less than the decrease in the natural employment deficit.
Chapter 7, Problem 3
3. Suppose that ex is the exchange rate between the US dollar and the Chinese yuan in that ex indicates the number of yuan that can be purchased with one dollar. The demand for dollars, denoted, D$, is given by the equation D$ = 2,800 - 200ex. The supply of dollars, denoted, S$, is given by the equation S$ = 400 + 100ex.
A. Calculate the demand for dollars and supply of dollars at exchange rates between 0 and 12 in increments of