You have estimated a Keynesian model for Ruston as follows: C 100 0:9 1

You have estimated a Keynesian model for Ruston as follows:

C ¼ 100 þ 0:9 1ð Þ t Y T ¼ tY ¼ 0:3Y M ¼ 0:23 1ð Þ t Y I ¼ 150 G ¼ 200 X ¼ 300 Remember that imports (M) are part of total consumption spending C and that disposable income is Y tY, where t is the tax rate.

a. Compute equilibrium income (Y) and taxes (T), imports (M), consumption C, and saving.

b. What is the multiplier for Ruston?

c. What happens to Y, T, M, and C if exports increase by 100?

d. Return to the original value for exports. What happens if the propensity to consume out of disposable income falls from 0.9 to 0.8?