in details please

1) (20 pts) For this question, assume that all factors that effect economic growth remain constant. Suppose that the economy is initially operating at the full employment level. Consider that there is a deficit in government budget (G > T). To reduce the deficit, the government plans to increase the taxes. What will be the effect of an increase in taxes in the short-run and in the long-run? Explain the dynamics of employment, output, and prices in the short-run and in the long-run by using the AS-AD model. Illustrate your answers by drawing the relevant graphs. 2) (30 pts) For this question, consider that the letter "A" denotes the last 4 digits of your student number. That is, for example, if your student number is: 12345678, then A = 5678. Assume that the factors affecting the aggregate expenditures of the sample economy, which are desired consumption (C*), taxes (T), government spending (G), investment (I ) and net exports (NX ) are given as follows: C = A +0.6 YD, T = 100 + 0.2Y, G = 400, Id = 300 + 0.05 Y, NX - 200 - 0.1Y. (a) According to the above information, explain in your own words how the tax collection changes as income in the economy changes? (b) Write the expression for YD (disposable income). (c) Find the equation of the aggregate expenditure line. Draw it on a graph and show where the equilibrium income should be on the same graph. (d) State the equilibrium condition. Calculate the equilibrium real GDP level. (e) What is the value of expenditure multiplier in this economy? If the government expenditure increases by 100 (i.e. AG-100), what will be the change in the equilibrium income level in this economy? What will be the new equilibrium level of real GDP? (f) Suppose that the output gap is given as "-2000". Explain what is output gap. Given this information, what is the level of potential GDP? How much should government change its spending (i.e. AG=?) to close the output gap