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3. (More difficult) Consider an economy in which the consumption function takes the following simple algebraic form: C =300 + 0.75DI, and in which investment
3. (More difficult) Consider an economy in which the consumption function takes the following simple algebraic form:
C =300 + 0.75DI, and in which investment (I) is always $900 and net exports are always =$100. Government purchases are fixed at $1,300 and taxes are fixed at $1,200. Find the equilibrium level of GDP.. (Hint: Remember that disposable income is GDP minus taxes: DI = Y - T =Y - 1,200.)
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