EC140 - Midterm 1 (CHAPTER 22) questions with accurate answers (verified) Graded A+

In our simple macro model with government, consider the equation YD = (0.75)Y. Which of the following statements about this equation is correct? A. Net tax revenue is equal to 25% of disposable income. B. If disposable income increases by $0.75, then national income increases by $1.00 and total tax revenue rises by $0.75. C. If national income increases by $1.00, then disposable income increases by $0.75 and net tax revenue increases by $0.25. D. Net tax revenue is equal to 75% of national income. E. If national income increases by $1.00, then disposable income increases by $0.25 and net tax revenue increases by $0.75. - Answers-C. If national income increases by $1.00, then disposable income increases by $0.75 and net tax revenue increases by $0.25. Consider a simple macro model with a constant price level and demand−determined output. The equations of the model are: C = 150 + 0.8Yd, Yd = Y−T, I = 400, G = 700, T = 0.2Y, X = 130, and IM = 0.14Y. Equilibrium national income in this model is: