Westion I
Suppose the consumption function is C = 100 + 0.8(Y-T), that investments are 60, that government spending is 200, and that taxes are proportional to income

a) What is the equilibrium GDP as a function of t?

b)What is the government spending multiplier? Does it increase with an increase in taxes (increase in r

c)If r, what is the equilibrium GDP? What is the government's budget surplus/deficit?

Consider an economy in which autonomous consumption is 800, the marginal propensity to consume is 0.8, investment is 400, government spending is 500, taxation is 400, and net exports are 100.

A. What is the equilibrium GDP in this economy? Show your work. (3 points)

B. What is the savings at this level of GDP? Show your work. (3 points)

C. What are the spending and tax multipliers? Show your work. (4 points)

D. If government spending increases by 200, what is the new equilibrium GDP and what is the increase over the original equilibrium GDP? Show your work. (4 points)

E. If the government increases both spending and taxation by 200, what is the new equilibrium GDP, and what is the increase over the original equilibrium GDP? Show your work. (4 points)

Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G​ =200 and fixed taxes of T​ =150. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function.

C​ =300​+0.80(Y−​T)

Suppose further that investment spending is fixed at I​ = 200

Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S

The people in Stataland spend 95% of their income and need basic consumption of 1000 to survive. Investment is 500 and government expenditures are 300. The budget deficit is 100.

1. What is the consumption function?

2. Set-up the model and find the Equilibrium GDP?

3. What is the consumption level at equilibrium?

4. What is the Actual Budget Deficit?

5. If Full Employment GDP is 35000, how much should the government change taxes T to get to it?

6. What happens to the budget deficit in this case?

7. From the original equilibrium if the government were to change Government expenditures G instead of taxes to reach F.E. GDP, how much should G change, and what happens to the Budget deficit in this case?

8. Which case here is better for the budget deficit?