5. Suppose that the following equations describe the 4-sector economy

Consumption function C= 60 + 0.8 Yd,

Investment function I= 100-5i,

% interest rate i=6 (use 6 to compute for the investment),

Government Expenditure G= 76,

Lump sum Tax Tx= 15,

Transfer payments TR=60,

Exports X=70

Imports M=20+0.2Y

5.1. Calculate the equilibrium level of income. At this level of income, is the economy

operating with a budget surplus or budget deficit?

5.2. Calculate the investment, government, tax, transfer payments and foreign trade

multiplier.

5.3. Suppose that government increases its education and health services by 65, what is

the new level of income?

5.4. If exports increase by 10, what is the new level of income? Is the economy

operating with a trade deficit or surplus at this level of income?