Problem: Fredonia has the following consumption function: C=100+.8DI Firms in Fredonia always invest $700 and net exports are zero, initially. The government budget is balanced with spending and taxes both equal to $500 each.
A. Find the equlibrium level of GDP
B. How much is saves? Is savings equal to investment?
C. Now suppose that an export-promotion drive succeeds in raising net exports to $100. Answer (a) and (b) under these new circumstances.