Consider the following macroeconomic model. Where Y is disposable income (income after taxes) and taxation depends on income (ie there is a tax rate). C = 20 + 0.8Y Y" = Y - T T = 0.25Y 1 = 50 G = 90 E = C+I+G3. What is the size of the multiplier for this economy, bearing in mind that taxation is endogenous for this economy? 1. 2.5 2. 2 3. 4 4. 1.5 5. If it was decided not to increase government spending to achieve the target output of 500 to what level would taxation need to be set to achieve the requisite change in spending and thereby output? 1. 20% 2. 15% 3. 30% 4. 10% 6. Assume that, for a different economy, the multiplier has a value of 3. Now assume that the government decides to increase aggregate demand in an attempt to reduce unemployment. It raises government expenditure by 100 million with no increase in taxes. Firms, anticipating a rise in their sales, increase investment by 200 million, of which 50 million consists of purchases of foreign machinery. How much will national income rise? (Assume ceteris paribus)