Suppose the Economy has the following relationships in the Goods Market?
C = 160 + 0.7*( Y - T ) + I + G
I = 150
G = 150
T = t1* Y, where t1 = 0.1
a.) Explain the tax system in this country?
b.) Solve for Equilibrium GDP (Y). Assume NX = 0
c.) What are C and Yd, and T?
d.) What are private savings and public savings?
e.) What happens to your answers in b.), c.), and d.) if the tax rate decreased to 8%?What was the original expenditure multiplier in this country? What is the multiplier after the change in the tax regime?