(2) determine the change in equilibrium aggregate income and aggregate output = since new Y =$15 T/yr. and original Ye = $12 T/yr, the change in aggregate $5 T/yr. fate output (3) determine the change in consumption = since at original Y, Consumption =$9 T/yr (height to the original Consumption curve when Y=$12T/yr) and at new$s T/yr. jon = $12 T/yr. (height of the new Consumption curve when Y = $15T/y/ Therefore the change in Consumption = (4) define the Keynesian tax Multiplier and determine its size: The government tax multiplier 's the change in aggregate income and aggregate output (increase or decrease) that is expected to occur when ment changes the amount they tax households and in this case is 14. Determine the following, if there is a increase in Government Spending of $1T/yr and the MPC = 3/4 a. the change in aggregate income (Y) in the 1" period = A Y, = remember the change in income (Y) in each period change in spending of that period. b. the change in aggregate income (Y) in the 2nd' period = AY,= MPC (4 Y,) remember the change in income in 1st period causes a change in consumption in the next period =MPC ((A Y,) therefore, the change in aggregate income (Y) in the 2nd' peri MPC (A Y)) = c. the change in aggregate income (Y) in all periods summed up = total change summed up = AG(1+(1-MPC) = $1T/yr. (1- (1-3/4) = $1 T 15.Determine the following, if there is a decrease in Government taxes of $1 T/yr.= $4$1 T/yr. since 1/4 of $1T tax cut a. the change in aggregate income (Y) in the Be period = A Y, = remember aggregate income doesn't change unless there is a change in spending and a tax cut is not a change in spending, but a ta [3/413/4 $1 change in consumption spending = MPC times the tax cut T/yr