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.2. Consider the followin IS-LM National Income Model: Y = C + l + Go Where C = C0 + a(Y T) Y = total

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.2. Consider the followin IS-LM National Income Model: Y = C + l + Go Where C = C0 + a(Y T) Y = total national income/output I = 10 bi C = total consumption T = F0 + W l = total private investment spending Mo 2 RV hi G = total government spending '1' = total tax revenues The subscript 0 represents exogenous M = money supply and demand spending. i = interest rate t = income tax rate a=mar inal ro ensi to consume D a.) [5] Construct a system of equations in matrix form. Perform enough substitutions such that only output and interest rate are left as the endogenous variables. b.) [20] Use any method from Matrix Algebra to solve the system for Y" and i'. ' I c.) [10] Solve for equilibrium investment 1*, by substitution. Discuss crowding-out effect by . . 61* examining 66" BY\" d.) [10] Find save. 6a . Discuss the policy implication and relationship with the marginal propensity to

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