Assume That Tax Revenue Is Represented by the Following Function

question 74

Essay

Assume that tax revenue is represented by the following function: T = - 200 + .25Y, where the first term represents transfer payments and the second term represents gross tax revenue. Assume furthermore that government spending is $400 billion and the economy is in equilibrium at $2000 billion. Why would a cut in government spending by $100 billion not cause the budget deficit to disappear? If the income multiplier were two, what will the value of the budget deficit be after the cut in spending?

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Definitions:

Personality Differences

Variations among individuals in regards to enduring patterns of thinking, feeling, and behaving.

Hofstede's Dimensions

A framework for cross-cultural communication, developed by Geert Hofstede, that describes the effects of a society's culture on the values of its members.

Cultural Personality

A term that may refer to the collective personality characteristics, attitudes, and traits shared by people within a particular culture.

Power Distance

A cultural dimension that describes the extent to which individuals within a society accept that power in institutions and organizations is distributed unequally.