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Assume that govt spending rises by 10 what would happen to

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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Solution Preview :

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Other Subject: Assume that govt spending rises by 10 what would happen to

Reference No:- TGS0654744

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Other Subject: Assume that govt spending rises by 10 what would happen to

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