2 In the economy of Zip, the marginal propensity to consume is 0.8. Investment is a60 billion, government expenditures on goods and services are a50 billion and autonomous taxes are a60 billion. Zip has no exports, no imports and no income taxes. a The government increases its expenditures on goods and services to a60 billion. What is the change in equilibrium expenditure? b What is the value of the government expenditures multiplier? c The government continues to purchase a60 billion worth of goods and services and increases autonomous taxes to a70 billion. What is the change in equilibrium expenditure? d What is the value of the autonomous tax multiplier? e The government simultaneously increases both its expenditures on goods and services and autonomous taxes by a10 billion. What is the change in equilibrium expenditure? Why does equilibrium expenditure increase?

f If the government wants to increase equilibrium expenditure by a800 billion, but wants to keep its budget balanced, by how much must it increase its expenditures and taxes?