Assume a Model with No Government or Foreign Sector

question 22

Multiple Choice

Assume a model with no government or foreign sector.If national income is Y = 800, autonomous consumption is Co = 100, and the marginal propensity to consume is c = 0.7, then total consumption is

• A)100
• B)560
• C)660
• D)700
• E)800

Distinguish between private and public goods.

Identify the conditions under which markets can fail to allocate resources efficiently.

Understand the concept of externalities and their impact on market efficiency.

Recognize the role of government intervention in correcting market failures due to externalities.

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Definitions:

Federal Personal Income Taxes

Taxes imposed by the federal government on the annual income of individuals or households.

Marginal Tax Rate

The tax rate applied to an individual's or entity's last dollar of income, indicating the percentage of tax paid on additional income.

Average Tax Rate

The fraction of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.

Incentive To Work

Factors, such as financial rewards or benefits, that motivate individuals to engage in employment.