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Suppose C=50+0.8Y I=70 G=200 TR=100 t=0.2.
a) Calculate the multiplier and the level of equilibrium income
b) calculating the budget surplus (SP)
c) Assume that t rises to 0.25. What's the new equilibrium income and the new multiplier?
d) Calculate the variation of the budget surplus, would the variation of the surplus be higher or lower if c = 0.9 instead of 0.8.
Elucidate how the multiplier effect would support Keynes explanation alsp explain how economies can fall into recession or depressions.
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