Problem
Consider the following parameters that describe an economy: C = 50 + 0.8YD I = 70 G = 200 TR = 100 t = 0.2.
a. Calculate the equilibrium level of income and the multiplier in this model.
b. Calculate the budget surplus in this model.
c. Suppose that the tax rate, t, increases to 0.25. What is the new equilibrium income? The new multiplier?
d. Calculate the change in the budget surplus.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.