Assume a closed economy with the following national income model:
Y = C + I + G0
C = C0 + bY D
T = T0 + tY I = I0 + iY
where I0 = 20, G0 = 120, C0 = 55, T0 = 30, b = 0.90, t = 0.20, and i = 0.08.
(a) Identify the endogenous and exogenous variables and the parameters.
(b) Find the equilibrium national income, consumption, and tax.
(c) What is the numerical value of the multiplier?
(d) What is the MPS?
(e) Is government budget in this economy balanced?
(f) What would be the new equilibrium income if the government expenditure changes by 20?