Assume that the economy is characterized by the following structural equations:
C = 160 + 0.6 (4 - T)
I = 150; G = 150; T = 100.
a) Determine the equilibrium output level.18
b) If G increases to 200, what is the how equilibrium level of output? What is the value of the govt. expenditure multiplier?
c) If tax down to 50, by how much will equilibrium output increase? What is the value of tax multiplier?