FINAL EVALUATION I. According to the Venezuelan National Institute of Statistics
ID: 1119292 • Letter: F
Question
FINAL EVALUATION I. According to the Venezuelan National Institute of Statistics, the Consumer Price Index (CPl) and Table 1 Gross Domestic Product (GDP) for the period 2009-2016 are as shown on Table 1: CPI, GDP and Unemployment 2009-2016 Year CPI GDP (Current $) Unemployment 2009 100.0 494,591,535 2010 130.9 677,593,637 2011 163.7 707,262,549 2012 208.2 1,016,834,748 2013 265.6 1,357,487,061 2014 318.9 1,635,451,060 2015 498.1 2016 839.5 3,031,242,431 5.2% 5.2% 6.1% 5.8% 5.6% 5.7% 5.8% 5.4% 2,245,843,966 2015 The Venezuelan government wants to close 2017 exactly at the same level ofe. In order to achieve that, you are required to come up with a tax policy that changes the amount of taxes to be collected by the Venezuelan Internal Revenue Service. What type of policy and magnitude should be implemented?Explanation / Answer
GDP in 2015 was 2,245,843,966. We want the GDP of 2017 to be 2,245,843,966. This is because price level (from CPI) and GDP rises continuously indicating that AD shifting to the right. We now wish to shift it back to its 2015 level. With MPC = 0.8, Multiplier = 1/1-0.8 = 5
Required increase in taxes = (3,031,242,431 - 2,245,843,966)/5 = 157,079,693
A contractionary fiscal policy that is aimed at reducing the tax by 157,079,693 should be implemented.
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