Suppose that for a particular economy, for some time period, investment was equal to $100, government expenditure was equal $75, net taxes were fixed at $100, and consumption was given by the consumption function , where is disposable income and Y is GDP.
(a) What was the level of equilibrium income (Y),
(b) What was the value of the government expenditure multiplier,
(c) What was the value of the tax multiplier,
(d) Suppose that investment declined by $40 to a level of $60. What will be the new level of equilibrium income?