An economy has the following characteristics:
Y = National income
Taxes = T = 0.23Y
C = Consumption = 538 + 0.77(Y - T)
I = 426
G = 334
X = 646
M = 0.14(Y - T)
Instructions:
Enter all values to two decimal places.
a) Find the equilibrium Y for this economy.
b) If potential GDP is $4,150, then what change in government spending is needed to achieve this level?
c) Calculate the spending multiplier.