1. Assume the consumption schedule for the economy is such thatC= 50 + 0.8Y. Assume further that investment and net exports are autonomous or independent of the level of income and gross investment is 40 and net exports equal -10. Recall that in equilibrium,Y=C+I_g+X_n.

(a)Calculate the equilibrium level of income for this economy.

(b)What will happen to equilibrium Y if gross investment falls to 20? What does this tell us about the size of the multiplier?