Suppose the consumption function is given by C(Y) = 50+0.5 (Y-T), where Y represents income and T represents net taxes. Suppose that the level of government expenditure, G, is 200; net taxes, T, are 200; planned investment, I, is 400. 1)The government expenditure multiplier is: a. -2 b. -1 c. 2 d. 1 The equilibrium level of output is: a. 850 b. 1500 c. 900 d. 1100

Q: 1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I= 300…

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A: Given -  a = 200, I = 340, G = 300, T = 300, b = 0.8, t = 0.25

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Q: Fill in the missing values in the following table. Assume that the value of the MPC does not change…

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