Question: Consider the macro model
(i) Y = C + I¯ + G.
(ii) C = b(Y - T),
(iii) T = tY
Where the parameters b and t lie in the interval (0, 1), Y is the gross domestic product (GDP), C is consumption, is total investment, T denotes taxes, and G is government expenditure.
(a) Express Y and C in terms of , G, and the parameters.
(b) What happens to Y and C as t increases?