1.Given the following information calculate Ye and answer the questions below.

C = 50+ .8Yd, I = 50, G = 150, X = 150, MPM = .2 and Tx rate = .2.

a.What is Ye?Draw an AE diagram to illustrate your answer.

b.What is Ce at Ye?

c.What is the budget balance at Ye?

d.If Y* is $20 more than Ye what is the cyclically adjusted deficit?

e.If government increases G by $20 to close the gap illustrate with the AD-AS diagram and the AE diagram and explain the impact on Ye.