Problem
1. From the Keynesians, Y = C + I + G + NX can be transformed into a theoretical model. In particular, assume that the consumption C = A + mpc (Y-T), where A is a constant, mpc is the marginal propensity to consume, Y is national income and T is income taxes. Suppose in the goods market equilibrium, aggregate expenditure = national income such that the two Y's will be the same from Y = A + mpc (Y-T) + I + G+ NX. . Suppose C = 400 + 0.75(Y - T). G = 100, I = 100, T = 100, and NX = 150, what is the Y in the goods market equilibrium? (All of the variables are in terms of million dollars)
2. Continue to assume that C = 400 + 0.75 (Y - 100), I = 100, and NX = 150. But the government now increases spending from 100 to 200, how much is the new Y in the goods market equilibrium?
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.