Complete parts b, c, and d.

b. In a given economy with an MPC of 0.8, the equilibrium GDP equals $850,000.

If G increases by $25000, solve for the new equilibrium GDP that will result.

c. In a given economy, with an equilibrium GDP of $600,000 both government

purchases and taxes increase by $60,000. Solve for the new equilibrium GDP

that will result from these two changes.

d. What is the relationship between the multiplier and the MPC?