(a) Use the equations to find the level of production for a given interest rate.

(c) Suppose that the government reduces taxes by increasing T\". What happens to the tax schedule? Use the result in (a) to calculate the effect on production. How does the effect depend on the marginal tax? Explain. (b) Assume that the government starts to demand more goods and services so that AG > 0. Use the result in (a) to calculate the effect on production. How does the effect depend on the marginal tax? Explain. Q6. Introducing government. We now introduce taxes and government demand for goods and services. We assume that the tax increases with income. We assume that the central bank holds the interest rate constant. (1) Y = C + I + G production = demand (2) c = c\" + b(Y T) consumption function (0 0 8: d > O)