Hannah accidentally overpaid her last credit card bill and has sent a written request for her bank to refund her difference. How
2 answers:
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Answer:
A) attached below
B)
C) The fiscal policy is called an automatic stabilizer because the taxes are dependent on the level of income and also the output of the multiplier is more stable because it doesn't respond to rapid changes in fiscal policies.
Explanation:
Given data:
C = Co + C1YD
T = t0 + t1Y
YD = Y - T
G and I are both constant
C1 lies between 0 and 1 while T1 lies between 0 and 1
A ) solving for equilibrum output
attached below
B) The multiplier
Multiplier =
The economy responds to changes in autonomous spending when t1 is 0 but responds less when t1 is positive, this is because the more positive t1 is the lower the multiplier value
c) The fiscal policy is called an automatic stabilizer because the taxes are dependent on the level of income and also the output of the multiplier is more stable because it doesn't respond to rapid changes in fiscal policies.
