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5. Fredonia has the following consumption function: C = 100 + 0.8DI Firing in Fredonia always Invest $700 and net exports are zero, Initially. The
5. Fredonia has the following consumption function: C = 100 + 0.8DI Firing in Fredonia always Invest $700 and net exports are zero, Initially. The government budget is balanced with spending and taxes both equal to $500. a. Find the equilibrium level of GDP. 'b. How much is saved? Is saving equal to Investment? c. Now suppose that an export-promotion drive suc- creds in raising net exports to $100. Answer (a) and (b) under these now circumstances
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