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An economy is described by the following equaons: C = 40 + 0.8(Y T) IP = 70 G = 120 NX exogenous = 10 Texogenous
An economy is described by the following equaons: C = 40 + 0.8(Y T) IP = 70 G = 120 NX exogenous = 10 Texogenous = 150 Y* = 580 a. What is the size of the multiplier in this economy? b. Find the numerical equation relating planned aggregate expenditure to output. c. By how much would government purchases have to change in order to eliminate any output gap? d. Suppose that government is considering a tax cut (or increase), rather than changing purchases, to eliminate the output gap in the above economy. By how much would taxes have to change
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