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The following is a closed economy.
E=C+I+G
G=1100
T=1100
C=200+0.80(Y-T)
I=1300
1)find equilibrium level of income?
2)Determine the size of both the gov't purchase and tax multipliers. What do they mean?
3)Assume that gov't spending rises by 10% What would happen to the equilibrium level of output determined in question (1) above.
4)Assume that gov't cut taxes by 10%. what would happen to the equilibrium level of output determined in question (1) above?
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