2. Suppose that for a particular economy:

C = 2500 + 0.8Yd

T = 2500

G = 2500

I = 3000

A) Determine the equilibrium income and show it graphically.Determine the government budget.

B) Has the economy achieved full employment if equilibrium income at full employment is 35000? What are the required changes to achieve full employment, if

(i) Government expenditure is increased? How does the government budget change?

(ii)taxes are reduced? What is the new budget and the new function for tax.

Show the outcomes graphically.