6 . Question 2. Algebra of the income-expenditure model

Consider the imaginary small country of Vuntut. Assume that Vuntut is closed to trade, so that its net exports are equal to zero. Suppose that the economy is described by the following consumption function, where C?is consumption, Y?is income (real GDP), IP??is planned investment, G?is government purchases, and T?is taxes:

C?

==

$25billion+0.75(Y-T)$25billion+0.75(Y-T)

Suppose G=$30?=$30billion, IP=$60??=$60billion, and T=$20?=$20billion.

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