SELECT * FROM question_mgmt as q WHERE id=5434 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=59 AND chapterId=606 and ex_no='1' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th macro-economics Government Budget and Economy we suppose that c 70 0 70y d i 90 g 100

Question:

We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium income? Does the government have a balanced budget?

Answer:

(a) C = 70 + 0.70 YD

I = 90
G = 100
T = 0.10 Y
Y = C + I + G
Y = 70 + 0.70 Y + 90 + 100
Y = 70 + 0.70 YD + 190
Y = 70 + 0.70 (Y - T) + 190
Y = 70 + 0.70 Y - 0.70 × 0.10 Y + 190
Y = 70 + 0.70 Y - 0.07Y + 190
Y = 70 + 0.63 Y + 190
Y = 260 + 0.63 Y
Y - 0.634 = 260
0.37 Y = 260
Y =
Y = 702.7

(b) T = 0.10Y
= 0.10 × 702.7
= 70.27

Government expenditure = 100

Tax revenue = 70.27

As, G > T, Government has a deficit budget, not a balanced budget.


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