2. Consider the following numerical version of the Keynesian model with a government

C = 100 + 0.8 Yd

I = 150

G = 200

T = 200

a. Using the equilibrium condition Y = C + I +G, solve for the value of the equilibrium

output. Yd = Y - T.

b. Suppose that, in order to maintain a balanced budget, the government increased net taxes by 50 when it increased government spending on final goods and services by 50. Calculate the change in the equilibrium level of output caused by the equal increase in G and T