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Consider the following equations that describe an open economy with government, where government transfers equal $0. C = 320 + 0.6YD I = 936 Budget

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Consider the following equations that describe an open economy with government, where government transfers equal $0. C = 320 + 0.6YD I = 936 Budget Balance = 0.2Y 534 NX= 712 0.08Y Part a: Determine the equilibrium level of GDP. Part b: Suppose potential GDP is 4,000 (Y'). Determine the value of 62 if the goal is to stabilize the economy by restoring equilibrium GDP to its potential level. Verify that you have the correct value for G2 by solving for the equilibrium GDP. Part c: How has the magnitude of the multiplier and the AE curve changed because of the changes to government spending? Use 2 to 3 sentences to provide an explanation that supports your answer. Part d: Government spending returns to G1 and the government wants to achieve potential GDP by altering the tax rate (t). Determine the value of :2 that will restore Y = Y*. Verify that you have the correct value for :2 by solving for the equilibrium GDP. Part e: How has the magnitude of the multiplier and the AE curve changed because of changes to the tax rate? Use 2 to 3 sentences to provide an explanation that supports your

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