Attempts 2 Keep the Highest 2 / 3 2. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so that its net exports are zero. Suppose that the economy has 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 = $20 billion + 0.75 x (Y- T) Suppose G = $35 billion, Ip = $60 billion, and T = $20 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y = C + Ip + G, the equilibrium income level is $ billion. Suppose that government purchases are increased by $100 billion. The new equilibrium level of income will be equal to billion. Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to Grade It Now Save & Continue Continue without savi