4. Assume you have the following model of the expenditure sector: C = = 400+ 0.8YD G = 300+ 0.1(Yp Y) I = 200,TR = 50,T = (0.25) .Y,NX = 40 a) (5 pts) What is the size of the output gap if we assume potential output is at Yp = 3,000? Step 1: Derive the AD equation with its slope. Step 2: Find the equilibrium output by setting Y = AD. Step 3: Compute the output gap. b) (5 pts) By how much would investment have to change to reach equilibrium at Yp=3,000, and how does this change affect the budget surplus (BS)? Use the total differential to get full credits. c) (5 pts) From the model above you can see that government purchases (G) are counter-cyclical, that is, G is increased as national income (Y) decreases. If you compare this specification of G with one that has a constant level of government purchases (for example, G = 300), how would the value of the multiplier differ? =- d) (5 pts) Assume the equation for net exports changes from NX = -40 to NX -40 - mY, where m is the marginal propensity to import. How would this affect the multiplier, if we assume that 0