GDP Consumption

$440 $450

490 490

540 530

590 570

640 610

Refer to the accompanying consumption schedule in an economy. All figures are in billions of dollars. If gross investment is $34 billion, net exports are zero, and there is a lump-sum tax of $30 billion at all levels of GDP, then the after-tax equilibrium level of GDP will be

$590 billion.

$540 billion.

$490 billion.

$640 billion.

Question

Business

Sergio Walter

7 September, 09:45

GDP Consumption

$440 $450

490 490

540 530

590 570

640 610

Refer to the accompanying consumption schedule in an economy. All figures are in billions of dollars. If gross investment is $34 billion, net exports are zero, and there is a lump-sum tax of $30 billion at all levels of GDP, then the after-tax equilibrium level of GDP will be

$590 billion.

$540 billion.

$490 billion.

$640 billion.

+4

Answers (2)

Know the Answer?

Lorenzo · Answer 1

Lorenzo 7 September, 12:44

0

The answer is B, $540 Billion.

Jovan Castillo · Answer 2

Answer: The answer is $490 billion

Explanation:

In a two sector model of National income

Y = C + I, or Yd = C + S

Where Y = National income, C = consumption, I = investment, Yd = disposable income, S = savings

In the question, tax is said to be a lump sum, which indicate that the tax is constant at all level of GDP. Therefore, the after tax equilibrium level of GDP is 490 billion, with reference to the consumption schedule where consumption of 490 billion is equal to disposable income of 490 billion.