Assume the consumption function is C=200+0.75(Y-T), I=100; G=100; T=100.
a) What is the equilibrium level of Y?
b) Draw a Keynesian Cross diagram showing the equilibrium values Y and AE. Also show the value for the AE line at the vertical intercept.
c) If G increases to 125, what is the new equilibrium Y?
d) What level of G is necessary to reach 1600 for Y?