– Macroeconomic Equilibrium in the Short Run- Output, Employment and InflationPlease answer clearly step by step extensive answers, so i can see what you have done πŸ™‚

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Chapter 11: Macroeconomic Equilibrium in the Short Run
Question1 In reality, tax revenues are not exogenous, but move positively with income (GDP).
Suppose that T = 𝑇̅ + tY, where t is an exogenous tax rate. Use this tax revenue function to derive
the government spending multiplier in the following simple model: C = c + c1(Y – T) I = 𝐼̅ G = 𝐺̅
NX = NX0 -mY
Question 2 Derive the IS curve for the economy in the above exercise, with I = 𝐼̅– 20i. Plot it in (Y,
i) space.
Chapter 13: Output, Employment and Inflation
Question 3 A Philips curve is represented by the following relationship: Ο€ = πœ‹Μƒ – 10(U – π‘ˆΜ…) + s,
where s is a supply shock term, on average equal to zero. Draw the Phillips curve when π‘ˆΜ… = 7% and
underlying inflation πœ‹Μ… = 3% and 6%. Okun’s Law is U – π‘ˆΜ… = -0.5 (Y – π‘ŒΜ…)/π‘ŒΜ…. Draw the aggregate
supply schedule when π‘ŒΜ… = 10,000.
Question 4 Using the conditions of the above exercise, show the impact of supply shocks s = 5%,
and s = -2%. Separately show the effect of raising π‘ŒΜ… to 10,200. Why is it argued that improving the
performance of the supply side of the economy is good for both inflation and employment?

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