Consider the following behavioural equations that describe the goods market in a closed economy: ? = ?0 + ?1?? ?? = ? ? ? ? = ?? where ? is consumption, ?? disposable income, ? income and ? taxes. The remaining exogenously given parameters are: ?0 > 0 is the autonomous part of consumption, 0

a. Solve for equilibrium output. What is the value of the multiplier for a change in autonomous spending? Explain the impact of the tax rate on the multiplier.

b. Compute consumption in equilibrium. Consider now a change in government spending. Compute and explain its impact on equilibrium output and consumption.

c. Assume instead, that investment is given by ? = ?0 + ?1?, where ?0 > 0 is the autonomous part of investment and 0 Question 2 Consider the following behavioural equations that describe the goods market in a closed economy: c=C0+C1YD m=YT T=tY where C is consumption, YD disposable income, Y income and T taxes. The remaining exogenously given parameters are: Go > 0 is the autonomous part of consumption, 0