The economy of Alphaland is represented by the following:
C= 50 +0.25Yd
T=1000
G=1000
I=1000
(1) Calculate the equilibrium level of output. Graph your solution.
(2) If the government spending increases by 50 what is the new equilibrium level of output? Use the government spending multiplier.
(3) If the government increases taxes by 50 what is the new equilibrium level of output? Use the tax multiplier.
(4) If the government increases taxes and spending by 50 what is the new equilibrium level of output?
(5) Calculate the equilibrium level of output in case where taxes depend on income according to the following: T=-25+0.125Y.