Simple Keynesian-cross Model.
The economy of Bernankistan is characterized by the following equations,
(1)C = 100 + .75Y d = 100 + .75(Y - T )
(2)I = 300
(3)G = 75,
(4)T = 100
a. Solve for the equilibrium level of income.
b. Calculate the government spending and tax multipliers.
c. If G increases by 25(from 75 to 100), find the new equilibrium level of income.
d. Suppose now taxes depend upon income such that T = -40 +.4Y:
i. Solve for the equilibrium level of income.
ii. Calculate the government spending and tax multipliers