1. Suppose that the model of the economy is given by
Y=C + I + G + X
C= a+ bYd
Yd=(1 -t) Y
X=g-mY,
Where I= $900 billion, G=1,200 billion, and the constants take the following values: a = 220, b= 0.9, t= 0.3, g =500, and m =0.1.
a. Show that the value of GDP at the point of spending balance is $ 6,000 billion. Compared with the on page 178 with exogenous net exports, is the multiplier larger or smaller?