3 4. Consider the following government's budget constraint:Ti = Gt +TRt = yYt +TR¢,%3Dwhere TRị is the transfer payment from the government to the household. In this case,the household's asset-accumulation equation is given byKį = R,Kį + W¿4 – Ct – T¿ + TRịSuppose the lump-sum tax T; is fixed, and the transfer payment of government TR4 adjustsendogenously to offset the change in y and balance the government's budget constraint.Does the presence of TRị cause any difference to the effects of y on the labour and capitalmarkets in the short run and long run?

The government transfer payment is the kind of money benefit given by the government to the…

4. Consider the following government's budget constraint: T₁ = Gt +TR₁ = √Yt +TRt, where TR is the transfer payment from the government to the household. In this case, the household's asset-accumulation equation is given by K₁ = R₁K++ Wilt - Ct - Tt +TRt Suppose the lump-sum tax T₁ is fixed, and the transfer payment of government TR adjusts endogenously to offset the change in y and balance the government's budget constraint. Does the presence of TR cause any difference to the effects of y on the labour and capital markets in the short run and long run?

4. Consider the following government's budget constraint: T₁ = Gt +TR₁ = √Yt +TRt, where TR is the transfer payment from the government to the household. In this case, the household's asset-accumulation equation is given by K₁ = R₁K++ Wilt - Ct - Tt +TRt Suppose the lump-sum tax T₁ is fixed, and the transfer payment of government TR adjusts endogenously to offset the change in y and balance the government's budget constraint. Does the presence of TR cause any difference to the effects of y on the labour and capital markets in the short run and long run?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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