Consider an open economy characterized by the following equations:

C = c₀+ c₁(Y-T)

I = d₀+ d₁Y

IM = m₁Y

X = x₁Y*

The parameters m₁and x₁are the marginal propensities to import and export out of domestic and foreign income respectively. Assume that the real exchange rate is fixed at a value of 1, and treat foreign income Y* as fixed. Let taxes T be fixed, and G be determined exogenously by the domestic government.

a) Write the equilibrium condition in the market for domestic goods, including government purchases in domestic demand,G, and solve for the equilibrium value of Y.

b) Suppose government purchases,G, increase by one unit. What is the quantitative effect on output? (Assume that 0 < m₁< c₁+ d₁< 1, and explain why.)

c) What is the quantitative effect for net exports when government purchases increase by one unit?

d) show diagrams and table for these set of questionss