1. Based on the Keynesian model and the formulas indicated below, compute the equillibrium level of GDP and explain how it changes if investment increases/decreases by 10% and why. What happens to the government budget balance (G-T) and why? Explain and indicate the formulas you are using.

Y=C+I+G

C=100+0.8(Y-T)

I=400

G=150

T=0.2Y

2. Based on the Keynesian model and the formulas indicated below, compute the equillibrium level of GDP and explain how it changes if investment increases/decreases by 10% and why. How will the government budget change and why? Explain and indicate the formulas you are using.

Y=C+I+G

C=150+0.75(Y-T)

I=450

G=120

T=0.25Y