The model is:
TE = C + I + G
C = a + b (Y - t Y + TR)
Where
t = .25 I = 200
a = 60 G = 250
b = .8 TR = 200
1. Determine the equilibrium level of national product?
2. Estimate the government's budget surplus?
3. The government decides to increase the tax rate to balance the budget. Let the change in the tax rate be +.04 (i.e.t = +.04). Determine the Y from this tax rate change. Find out the new equilibrium level of Y? Find out the budget surplus? Graphically depict the effect of this tax rate change on Total Expenditures.