Consider our standard formula for GDP: Y=C+I+G+X. Additionally note that consumption is given by: C = a+b(Y-T) where T= -20+0.2Y. You also know that : a=150 ; I = 500 ; G = 385 ; X = -7 Furthermore you know that the marginal propensity to save (MPS)equals 0.4
Calculate the following: a.) Marginal Propensity to Consume b.) Government spending multiplier c.) Tax multiplier d.) Y* e.) Government Deficit